Proactive CONSUMERS PAY LESS FOR INSURANCE
The long and short of it is that insurance companies want to make a profit and will not offer lower escalations or significant discounts on premiums unless pushed to do so
customer being underinsured, as the increase in the insured value will also account for a portion of the overall premium increase that is allocated (
O’Callaghan says when a customer contacts them regarding a premium increase, “we will do what is possible to assist and retain the customer. This may range from adjusting the customer’s cover based on the individual’s specific needs, which may have changed since inception of the policy, to reviewing the increase to determine if a discount can be allocated.” In some cases, Auto & General will make a business decision “to insure certain customers at a rate lower than what we would deem economical to insure the customer for the next year”.
So Ros really benefited from the fact that she had a good track record. She had been insured by Auto & General since 2008 and she did not claim against the home contents or portable possession sections of her policy. “Based on her outstanding customer profile, a decision was made to insure her at a lower rate and a discount was allocated accordingly.”
While Ros is understandably frustrated that Auto & General did not initially put through a lower premium increase, it highlights the need for customers to remain proactive.
In Gillian’s case, Ernst Gouws, CEO of OUTsurance, says that over time, a client’s premium rating could change.
“When we calculate a client’s initial premium at the time of taking out cover with us, we use a very sophisticated actuarial model to predict the client’s likely future experience with us.
“Based on this, we set the client’s initial premium. Over time, we get to learn a lot more about the client’s actual experience with us, and we use this data – over time – to adjust the client’s initial premium.”
Gouws explains that some clients, therefore, get an annual adjustment that is in excess of inflation, which reflects a worsened profile, while others get a below-inflation increase. Some clients don’t get any inflationary adjustment to their premiums, which implies a premium reduction in real terms.
Due to the fact that Gillian had not claimed between September 2012 and June 2014, her profile was close to receiving no renewal adjustment, but still fell within the standard 7% adjustment bracket.
“When she called in to query her premium, our retention adviser did his best to retain her as a client. Our system allows our retention advisers a measure of discretionary discount, and it allowed him to waive the renewal adjustment and offer her roughly a 25% discount on her premium.”
As Gillian had subsequently submitted two claims, when she called the second time she did not receive any further premium reduction, but the adviser was able to waive the renewal adjustment.
“We believe we offer our long-standing clients very good value for money. Yes, it sometimes happens that we are able to give a client some further discount when she queries her premium or wants to cancel, but this depends on the client’s profile with us.
“There are also many clients who call in because they are unhappy with their premiums, or because they were offered a lower premium by a competitor, but to whom we cannot offer a better deal. Over time, a good profile with us does lead to lower premiums in real terms, without the client having to query her premium,” says Gouws.
The long and short of it is that insurance companies want to make a profit and will not be offering significant discounts on premiums or lower escalations unless pushed to do so. The good news is that it is a highly competitive industry that benefits individuals with good risk profiles – but you have to be proactive.
“We live in a world where the consumer is king and if you look after your insurance claims record, you will be in a position of power to successfully negotiate increases without having to change insurers,” says Fourie.
Different insurers offer different rates for the same cover, so it is worth shopping around. As Buys explains, insurers hire actuaries who have developed different rating factors that influence the different elements.
“Imperfect pricing and differing strategies to an extent also result in policyholders being able to purchase insurance cheaper at another insurer,” says Buys.
So, get proactive and check that you are getting the best deal from your insurer.