Outsurance part 2 – just ask for a better premium
A short while ago I wrote a piece about Outsurance’s latest campaign which offers all your premiums back after 15 years if you don’t claim. Following on from the piece I was interviewed on the Money Show on 567/702 about why I thought the campaign was not a great one. On the way home from the interview I turned on the radio and heard the CEO of Outsurance Life call in to dispute what I had said. An interesting series of email correspondence has followed.
My 2 issues with Outsurance are as follows:
- My experience shows that they are (very) expensive by comparison with other (traditional) insurers, and
- The likelihood of having the same policy in place in 15 years time is very slim. Stats are not available but the average term of an insurance policy is probably less than 5 years. Mainly because underwriting and health has improved and insures keep re-inventing their products. And rather than automatically passing on the improved benefits to clients, they seem to prefer for brokers to write new policies.
As a result if the above, in my opinion, it would be better to go for a lower premium from a traditional insurer and then put the saving into a unit trust fund.
During our correspondence, Outsurance provided me with a series of quotes relating to their campaign. Their unique selling point is that “you get to bypass the broker and deal directly with one of our expert life insurance advisors! This means no broker fees or commissions ever again!” However, they do not believe that is fair of me to compare their cover which supposedly has no-commission on it with a no-commission quote from another insurer. Their argument being that no-one does insurance without commission on it. Well, we have been working like for a long time! Even so, a full commission quote from a traditional insurer, in my experience, is still usually (significantly) cheaper than direct cover. While there may be no broker involved, someone has to pay for the very expensive television adverts.
Yesterday I decided to investigate further and was absolutely gob-smacked by the interaction that I had with their call centre. I was looking for R2million life cover (on my own life) and got quotes from another direct insurer, a traditional insurer and then I called Outsurance. Yes they were very efficient but towards the end of the 30 minute phone call the agent informed me that I qualified for their cover but that before he gave me the premium, he informed me that I should just tell him if I thought it was too expensive – this sounded ominous. Surely they would have a standard premium for all clients of a similar rating and would also give me their best offer upfront?
Apparently no so! The initial premium quoted was R1328 for R2m life cover and this included their “15 year premium-back Outbonus”. The agent then asked me what I thought and I told him that compared to 1Lifedirect they were very expensive. 1Life’s premium was R630pm. He immediately informed me that he could drop the Outsurance premium to R650 (including the bonus). Unbelievable! If I did not know better I could have paid more than double what they could do…what kind of business model is this? And where does treating the customer fairly fit in here?
It got worse. I enquired of the agent how this worked and just how low would they go? Did I need to imagine that I was at some kind of market or bazaar where I needed to barter for a better deal? Apparently they could not do better than R440 (no “outbonus” however) even though I informed him I could get the same cover for R402 (with full commission on it) through a broker. I did not dare to tell him that I could actually get it for R301 without commission on it elsewhere.
I then tried to find out about the premium and cover escalations. 5% on the premium, no cover escalation…if I wanted a cover escalation then the premium would have to go up to R594pm, plus a monthly admin fee of just under R20…total premium R614pm (and there is also a once-off take-on fee of R150).
The result is that Outsurance, for cover on my life, despite no broker fees or commissions ever again, is around 200% more than I can get through a traditional insurer – see the table below for the comparisons.
| Company |
Premium |
Premium in year 15 |
Cover in year 15 |
Note |
| 1Lifedirect |
R 630 |
|
|
Online quote – no final values on quote |
| Outsurance (with bonus) |
R 1 328 |
|
|
First offer |
| Outsurance (no bonus) |
R 828 |
|
|
No out-bonus, first offer |
| Outsurance (with bonus) |
R 650 |
|
|
With bonus, 2nd offer, no escalations |
| Outsurance (no bonus) |
R 440 |
|
|
No bonus, 2nd offer, no escalation on cover |
| Outsurance (no bonus) |
R 614 |
R 1 886 |
R4.16m |
No bonus, 2nd offer, escalation on cover, R150 take on fee |
| Altrisk (with commission) |
R 402 |
R 2 369 |
R3.96m |
|
| Altrisk (no commission) |
R 306 |
R 1 886 |
R3.96m |
After chatting to a few people about this some other interesting points have arisen.
It seems that Outsurance is in the business of negotiating premiums with clients. A few friends have recalled to me how they phoned Outsurance (short term) to inform them that they wanted to cancel their cover because they were moving to Discovery Insure. On the spot, Outsurance offered to reduce their monthly premiums by 100’s of rands, matching or beating the Discovery offer! Needless to say my friends were left feeling completely ripped off by Outsurance. If they could reduce the premium just like that, why had they not given them a better deal upfront? Good question!
I have also received some emails from complete strangers telling me that in their experience, the quotes that they had got from Ousturance were more expensive than the cover they had through their brokers.
So here’s my advice:
- Just because you go direct does not mean you will get a better deal – my experience is that the direct insurers are more expensive than the traditional cover with commission on it through brokers.
- Seems to be that if you go direct, expect to negotiate for a better deal.
- If you need insurance, then pay as little as possible for as much as possible and invest separately into a unit trust or ETF.