In our 6 August 2009 newsletter Taking the Fight to the Direct Insurers we questioned the blanket ‘tarring’ of short-term insurance brokers by direct insurers like Dial Direct and OUTsurance. The series of adverts that triggered the complaint were run by OUTsurance and feature three middle-aged insurance brokers gleefully misleading consumers of broker-sourced short-term insurance product and taking delight in their subsequent distress. The message was clear – a short-term insurance broker will intentionally hide facts about a product from his client.

Many readers contacted us to express their dismay at the tactics employed by various direct insurers in their television and radio advertising campaigns. We believe the following letter from John Bunting, executive chairman of Quicksure (Nationwide Insurance Administrators) accurately reflects the sentiment of the insurance brokers who responded.

To FAnews Online:

As an underwriting manager representing hundreds of brokers and tens of thousands of clients, we view OUTsurance’s adverts as an insult to the industry as a whole. Their comments regarding brokers and other insurance companies are nothing short of slander. Who has given them the authority to criticize the way other insurance companies “supposedly” think or operate?

Not all insurance companies or brokers act in the way as it is perceived by OUTsurance and conveyed to the public. In most instances these people and their companies are decent and hard working. [Direct insurers] say that the consumer must cut out the middle man, in order to save premium and yet we are often with our “middle man” more competitively priced than what they are.

I cannot help, but to wonder how the likes of OUTsurance can challenge the intelligence of the consumers and the opposition by literally spending millions of rand on advertising campaigns, cash back bonuses, additional staffing / equipment and yet [claiming] by cutting out the “middle man” they are in a position to offer better premiums.

At least if a broker provides a client with incorrect advice, the client has protection through the office of the FAIS Ombud, whereas direct insurers are let off and continue to ask prospective clients misleading questions and most of the time confuse them.

The three “short grey men” most certainly do not represent individuals working at OUTsurance, but rather experienced individuals in the insurance market that one would find at the likes of Santam, Mutual & Federal and Zurich.

OUTsurance’s comments and advertisements are blatant lies and in my opinion they are in breach of the Code of Conduct of the FAIS Act. The latter is there to protect brokers and insurers from derogatory remarks and by running each other down in the eye of the public.

I simply cannot understand why the five giants in our industry cannot get together and defend themselves against these unscrupulous people.

Yours faithfully,

John Bunting

If the short-term insurance industry wants to bolster its image among the general public – and increase its penetration in the personal lines space – then all role players must focus on improving the industry image. Increasing the number of private individuals with household contents and motor vehicle insurance will be good for all players in a country where short-term insurance penetration is abysmal. This should be the primary focus of both direct and broker sales channels.

We believe the direct insurers can advertise their competitive advantage without discrediting other industry stakeholders and sincerely hope the various insurance industry bodies will take them to task for their behaviour to date.

Editor’s thoughts:
South Africa offers a number of mechanisms for dealing with advertising disputes. The problems is by the time the Advertising Standards Authority receives and responds to a complaint the advertising campaign in question has usually run its course. Someone running a questionable campaign can simply shrug and mention the advertisement won’t be ‘aired’ again. But the damage is already done. Do you think there should be some form of internal censure for insurance companies that bring the industry into disrepute? Add your comment below, or send it to gareth@fanews.co.za