Cheap and Cheerful... Until something goes wrong.

The value for money question is one we ask ourselves in everything we do in life. We have have just gone through it with our Family Health Insurance. I guess being in the same industry we pay a bit more attention to it, but it is easy to get dragged into the 'cheapest' deal when a salesman is pushing it on you. We used one of the comparison companies who obviously earn a commission if they place you through a certain company. It was an interesting process as it proved again that all we seem to peddle in Australia is "Cheapest is best." We were happy to stay with our current provider even though $35 a month more as it had more cover.

There was research done in the past decade showing what clients in various countries look for during a sales process. For example in Germany the customer looked for efficiency, USA looked for the 'whats in it for me,' whilst Australians purchased on the desire to have a relationship. We didn't care what it cost as long as we trusted the person we were dealing with and knew they had our interests at heart. We cant pin point how long ago this research was done but it's fair to say the game has changed.

All we seem to see - and not just in our sector of Insurance - is media jamming 'cheapest' or 'best deal' down our throats. Even consumer advocates 'Choice' dedicate space to this. If consumer advice is based only on price then we are heading down a very steep and dangerous road. It's like anything, if you buy the cheapest version, it generally is the weakest in the range. Look at Motor Cars; $15,000 or thereabouts will get you a Nissan Micra. For $72,369 you get a Nissan 370Z Roadster. Straight from the same factory yet poles apart in price. Without going into details on Specs and power ratios you know straight away there is a massive difference in quality from one product to another.

Often we head grocery shopping and find a cheaper version of flat bread or vegetables only to find out a day later the bread is mouldy and the vegetables became dust when you cut into them. Yet the advertising slant thrown at us is 'cheapest is best!' What happened to the pursuit of trust in a product or service, or even an individual?

So let's push this into an Insurance angle. Insurance in the media - and we've made no secret of our thoughts on it - is portrayed as cheap and cheerful, great fun, oopppsiiieee someone will fix it. Hooray Rhonda and Katut are hooking up!! Aliens now tell us the one company has been rated 'cheapest' by a well respected financial services magazine. Another says they're completely on line to save you money... Could go on. With something as important as the protection of your assets why do we get dragged into 'Cheapest is best?' It simply makes no sense.

Insurance is a cost on the family and business budget, we totally appreciate it and remember we pay it too as a business and as a family. But when something goes wrong surely you want the peace of mind to know your Insurance policy will work. We recently did an example comparing our own AIMS Home & Contents Policy with a product offered by a bank, incredibly the difference in cover was alarming. Of the limits to cover provided more than 90% of the policy offered by the bank was significantly inferior to our products. Is it the cheapest we hear you say?  Well compared to ours, on most occasions yes! But then you need to think what would happen if a claim situation arose.

Residents of Tuncurry pass daily a home which was damaged by a tragic gas explosion in July 2013. 2 doors up from the now cleared block is a fenced off home with signs showing the locals distaste of the way a bank insurance policy is alegedly responding to the claim. 9 months on and the home is not repaired nor occupied. Now we personally do not know the circumstances but for the owners sake we hope the policy has cover for temporary accommodation whilst the home is repaired for starters. Next door however the home is almost complete after copping damage from the same blast. A church behind the block also reopened it's doors just last week.

http://www.greatlakesadvocate.com.au/story/2009719/local-support-months-on-after-house-explosion/

http://www.greatlakesadvocate.com.au/story/2112008/photos-tuncurry-church-reopens-after-explosion/?cs=12

So these examples show quite clearly that who you purchase your insurance from has a dramatic effect on the outcome of a claim. Just again to qualify we are not privy to any one of those individual circumstances but it shows who you buy from has an impact. A banks insurance premium will often be cheap. Why? Well with the size of the banks they have the buying power to put pressure on the insurer they contract to provide the service. Hence alot of the control over premium is not driven by the risk. In the news lately is the sale of Wesfarmers Insurance division to Insurance Australia Group. (IAG) One of the big ticket items within this sale is the 10 year contract to provide insurance products to Coles. Meaning they have the chance to pickup massive market share yet provide a raw boned basic policy.

Comparing apples to apples is not what it seems sometime. During the previously mentioned comparison between our product and a banks we were grilled on the differences and successfully made the client aware of the deficiencies in cover. The client could not comprehend  why one Insurance policy should be different to another and why he should pay $1,000 more. (by example) It's worth noting that the client never considered approaching the bank insurer to ask these questions as he knew we were providing him with the right advice....... yet he still went with the bank. Its hard to put your finger on exactly why. Yes times have changed and the value of a dollar in your pocket compared to someone Else's is higher then ever before. But if we know the outcome if something happens why do we still chose 'cheapest wins.'

The Queensland floods were a prime example over the past few years. Customers who purchased a 'cheap and cheerful' policy whilst living on the banks of the Bremer or Brisbane rivers were shocked when their policy didnt respond. We remember one consumer coming out saying he was offered Flood by his insurer but it was $800 more so didn't take it. He was honest and copped it on the chin but that extra $800 per year may have saved his property.

So is cheap always the best option when it comes to protecting your business or your personal assets? Not always. Our role as advisers is to source the broadest possible cover and the most competitive price. We advise on the cover we suggest you need for your particular risk. We provide options for highest level of cover and if need be a basic product. In most cases our basic product offering is still broader than many  others in the market. The products we have access to have been specifically designed by us in consultation with the Insurance companies. Meaning if you want a product that has been designed with the customer as the highest priority, then we got em. Match broad levels of cover with independent advice and you come back to dealing with people you know have your interests at heart. We're back to that relationship or trust point again.

It is a difficult issue we understand and if people chose to insure with cheap and cheerful products then this is fine as well. We only ask that in choosing one of these products you understand completely what you are and are not covered for. If you know what are covered for then there will be no shocks if a claim were to arise. To get advice before price, drop us a line.