Is dealing directly with an insurer dangerous?

An interesting question and one that you would expect me to answer with a resounding ‘YES’. Those of you that know me will realise that I never make statements or comments without back up information, facts, and true-life examples so, please believe me when I say that this answer is not so that we get a mass of new clients coming to us (although it would be nice!), but to warn you of what I have found.

Firstly, whilst I can no longer find the rule in the Insurance Act, historically, it was deemed to be illegal for an insurer to charge a different rate when dealing directly with a policyholder, than if you used the service of an insurance broker. As such, your premiums should be the same, but you are getting the benefit of having an independent expert advising you, not on one Insurer’s products, but the entire market. In addition, you have someone who is there at the time of a loss or dispute to ‘fight your corner’…something you do not have when dealing directly with an insurer.

As mentioned, I am not here to criticise the insurers for dealing directly, but from the examples I have seen, the level of advice can only be described as ‘poor’. Let me give you some examples:

  • A business had a dozen or so shops, with a maximum value of each shop just under KES 2m. The insurer sold them a Fire and Perils policy, with an excess for each and every loss of KES 2m!! In effect, no cover, but insurers still took their premium!
  • High end camp in the Maasai Mara has burglary cover, but that cover only applies if an alarm is installed at the premise, known as an ‘alarm warranty’. No alarm is fitted and pointless anyway as security company could not hear from Nairobi and would take 4-6 hours to respond! Premium taken by the insurer, despite there being no cover.
  • The same client has half a dozen safari tour vehicles. Legally, these have to be insured under a specific PSV or TSV policy, but they have been insured under a private car policy. This can have serious ramifications in the event of a claim, and with the law.
  • Another direct client had their plant and machinery covered under their Political Violence and Terrorism policy, but the insurer forgot to cover under the Fire policy! Same client had their Consequential Loss covered, but not under the PV&T!

Now, some ‘direct’ clients often say to me that ‘they’ve been dealing directly for years and have never had a problem’ My retort to that is always ‘have you ever had a large claim’…to which the answer is always no. It is true, that if you pay a ‘handsome’ premium each year, insurers may pay you on an ex gratia basis just to keep you ‘sweet’, and I’ve even heard of Insurers offering to pay a claim as long as you promise to renew with them! This is all well and good on a KES 100k claim, perhaps KES 1m, or even KES 5m…but ask for them to cough up on KES 25m, KES 100m or even KES 1bn and see what their stance is! And trust me, these losses do happen…we are handling some presently.

Challenge Jeremy:

As a sign off, I am sending out a challenge to anyone who reads this, and they deal directly with an insurer. Send me the policy details and I will find at least one major error. If I do not, JWS will pay to a charity of your choice, in your name, the sum of KES 10,000.

I look forward to hearing from you – Email: jeremy@jwseagon.com