https://www.facebook.com/FinancialFitnessBunny/videos/1189749327823574
Dear Nicolette
I watched your video on Wednesday 11 October 2017 whilst
sitting in a bus at Mbare Musika bus terminus in Harare on my way to our rural
home. You know the price of data in Zimbabwe is actually a human rights issue,
I mean how can they charge so much in an impoverished country? Any way the
topic you were discussing interested me very much and I had no choice to but to
watch until the end and in the process my battery and data were drained and I promised
to respond when I came back to SA.
I think you were treated unfairly. I do not consider my-
self an expert in Insurance but I know one or two things about insurance. I worked for almost 20 years in the insurance
industry and I left the industry beginning of October 2017. Firstly I worked
for almost 10 years in the Zimbabwe Insurance industry starting in
underwriting, then claims, then briefly as an insurance broker and finally as a
middle manager in charge of underwriting and claims. I also passed my Insurance
fellowship exams in 2005. In 2007 when the Zimbabwe economic situation became
unbearable, I migrated to South Africa and I got employed as a claims advisor
in an insurance firm and I worked there for just over 10 years. My role in SA
involved mainly business claims and I also did personal claims for about 3
years and also briefly acted as a claims team manager for 2 months. As someone
who is not currently affiliated to any insurance firm, I will try to be
impartial as much as possible.
I would have liked to have read a copy of your policy
wording before responding to your video. In any case, I will use the knowledge I
have gained from my insurance studies, Multi-Mark policy wording which is a
standardised policy wording that the insurance industry used in the past until
the Competition authorities discouraged the practice and I will use the
knowledge I gained in the claims environment of the 5 insurance companies that
I worked for plus the practice of many more insurance companies I worked
closely with as an insurance broker.
In general cellphone and other portable items that you take
away from your home/house are covered on an All Risks Basis. Such items include
your camera, laptop, jewellery on a person, watches, clothing such as your kids
school uniform or your clothing that you take away with you from home e.g
baggage that you take with you for an overseas holiday. All Risks cover when you compare it with your
household furniture has important differences.
- Items on All Risks has
a wider cover e.g you will be covered for accidental damage, theft
e.t.c. When you read the cover on
All Risks the defined events are simply listed as “ Loss of or damage to
item”, which in theory means anything that happens to the item is covered
unless if it is specifically excluded. On the other hand the household
policy (House contents policy) and the Home Owners (Buildings policy) only
lists specific perils such as falling trees, fire, lightning, explosion,
earth quakes etc. So for a perils policy you are only covered for the
listed perils subject to the conditions, general exceptions, clauses,
warranties, specific exceptions e.t.c
- An All Risks policy covers
you on a world- wide basis e.g if you take your cellphone to Ghana with
you it will be automatically covered as it is covered anywhere in the
world. Whereas your TV in your house will only be covered at the address
noted on your policy schedule (of course if you take it for repairs there
might be extensions to cover you for that)
- Cover on an All Risks Basis
is normally more expensive as it has more wider cover than the normal
Perils policy, hence the cellphone cover is normally very expensive as
well as the Comprehensive Motor Insurance cover that is also on an All
Risks Basis.
Another very important issue to consider is that insurance
is only part of the Risk Management equation. In general individuals and firms
are exposed to risks, e.g risks of theft, fire, liability, reputational damages
e.t.c. After having analysed the risks an individual will decide on what to do
with the risks they are faced with. The decision might be to transfer the risks
to the insurance company in return the individual will pay a premium to the
insurance company. In most cases the insurance company will require an
individual to pay an excess which in turn means that the individual is then
forced to retain part of the risks. In other cases the individual might decide
to retain the risks and they will try to mitigate the risks e.g by employing a
guard, putting a tracker on a vehicle, erecting burglar bars around the
premises e.t.c. Also note by mitigating the risks, an individual might actually
be able to get insurance at much lower insurance premiums.
Coming to Cell phone Insurance
My experience with Cell phone insurance is that it is a very
expensive insurance cover to get. I remember around 1998-1999 in Zimbabwe when
the premiums for the cellphones increased drastically to match the losses
experienced. Also part of being
financially savvy is to always consider the cost versus benefit. I am a stingy
man and I do not buy cell phone on contract, I only buy a phone up to R3 000.00
and I use pre-paid (I used to use contract cellphone when the company was
paying the bill). Because of the relatively cheap phones I use, it is not
economical for me to insure the cellphone. One must always consider the premiums that you
are charged on a cellphone together with the excess that you will be required
to pay in the event of a claim. For example if the premiums that you contribute
over say 12 to 18 months (a normal life span of a cellphone) plus the excess
exceeds 50% of the value of the cellphone, the question is, is it rational to
insure the cellphone?
Whether your cellphone is insured or not, you should always
know the IMEI number of your cellphone which is a unique number to your phone
(you might consider it to be the VIN number of your phone). You get the IMEI
number of your phone by Dialling *#06#. Should your cellphone get stolen or
lost you will need the IMEI number in order to block the cellphone with network
company and also to open a case with the police. My understanding is that once
a cellphone is blocked it cannot be used again in the country. It is very
important for everyone to block any lost or stolen cellphone as this will
discourage the theft of the cellphones. I suspect that the blocked cellphones can
be used in other countries (those who have the information might comment on
this) in which case SADC, Interpol and Cellphone companies in neighbouring
countries might cooperate in the same way stolen cars are recovered in
neighbouring countries. Also as individuals we should desist from buying stolen
property. Cellphone theft is a big issue in that it drives cellphone premiums
high, theft of cellphones are often accompanied by violence. Our home is around
Pretoria Central and I normally leave my cellphone at home after having been a
victim of a cellphone mugging about two years ago.
I know there is a perception that insurance companies thrive
on consumer ignorance. For your own information the industry is well regulated
in South Africa, consider this statement from the then Minister of finance Mr.
Trevor Manuel on the launch of the Ombudsman for Financial Service Providers, “The
era of properly regulated financial services has dawned, which should banish
the dark ages of non-disclosure, unreadable fine print, and mis-selling.”. From
my experience when an operator realises that a claim is going to be rejected,
he or she will first get permission from the supervisor. Once the supervisor
agrees with the rejection, an official letter is then sent out to the
client mentioning the reasons for the
rejection. The rejection letter will also spell out the recourse the client has
e.g. appealing internally to the company in writing if the client is still not
satisfied they will then refer the matter to the Ombudsman. It is important to
realise that the ombudsman is very impartial and there is no cost to the client
involved during the process. Still if
the client is not satisfied he or she will then approach the courts.
In your case Nicolette, I suggest you first get the letter
with the rejection reasons in writing and then pick up a phone and ask to speak
to a claims manager at the insurance company and if you are not satisfied then approach
the insurance ombudsman. Believe you have nothing to lose by following this
route. The insurance firms like any business they are also worried about their
reputations.
My general observations from my experience in the industry
- Clients must always be
honest. Insurance is based mainly on the law of contract hence it is
always imperative to be truthful and disclose all relevant facts when you
enter into the insurance contract and also at the time of claim. You should
rather shop around for the best terms based on the correct facts.
- Ask questions if you are
not sure. You are actually the boss you are the reason why that insurance
company is in business. When a person finances a car they are in a hurry
to get insurance and drive the car. Make sure that that you can afford to
pay the quoted excess in the event of a claim. (Chances are if you can’t
afford normal car instalment and normal insurance the vehicle might be
beyond your budget).
- Financial literacy is key,
some cars are in demand such that you will buy them at a value that is
more than their replacement values. For example if your vehicle’s retail
value is only R200 000.00 yet you buy the vehicle for R250 000.00,
should that vehicle be stolen the next day the insurance company will only
pay R200 000.00 which is the value of the vehicle. Make sure you take
credit shortfall cover which is offered by both the insurance companies
and also through the car dealership when you sign the hire purchase
agreement.
- Now and again maybe after
a year talk to your insurance company try to negotiate a better deal e.g
maybe lowering your higher excess based on the good experience you have
had with an insurance company.
- Minimise your risks. We
all know which areas are more risky when it comes to insurance for example
if you have a tracking device in your vehicle everytime you drive to that
area they phone you to warn you. Chances are if you stay in that area your
insurance premiums will also be high, this is a fact of statistics and not
race, you might need to move to a new area that is cheaper for you in the
long run. We all know which cars are prone to theft and hijackings,
chances are if you buy that car it will be very expensive to buy and the
insurance premiums will be unbearable. So you much choose wisely that is
part of being financially savvy.
Thank you very much for your work in educating people about
financial literacy.
Regards
Dabson
