£1 million draws, discount gym memberships, no claims bonus discounts, even cuddly meerkat toys. Insurance companies are using all marketing tool these days to entice new people to switch to them or stay with them. Money spent on advertising and online marketing is vast and the trend looks to continue with insurers trying to outdo one another.
Personal insurance has always had a reputation of being one of those life admins that we would rather not have to do, yet we all know it is a necessity. Even with the advancements of the internet and a host of comparison sites, a poll last week stated that renewing motor and buildings insurance topped the list of pet paperwork peeves for people. (Metro – 23rd July 2014)
I think that most people see the point of insurance or that it is a compulsion in the case of motor insurance or building insurance (when mortgaged). However I believe that there is a real lack of knowledge when it comes to choosing which one is most appropriate. The Financial Conduct Authority have just announced that comparison sites do not offer good advice and simply compare price of quotes, not suitability for clients.
People are quick to seek professional help, in the case of a doctor, dentist or lawyer and yet when it comes to insurance too many rely simply on selecting the right insurance via a comparison website instead of through professional advice of a broker. The majority of the time, a policy is chosen purely and simply on price – the cheapest is best, often hoping they will never have to claim. Most people are sceptical about whether a policy will pay a claim, if made and assume that insurance companies will try to wriggle out of any claim, via small print in the policy wording.
It seems ludicrous to think that someone will make their biggest investment in something like a house or a car and yet will then take out the cheapest policy possible without knowing about the insurance company, its financial status, claims handling or any particular policy endorsements to cover that investment.
An insurance policy is an intangible object and therefore unlike a sports car or a watch for instance, where you can touch and see the difference, insurance policy documents look very similar so therefore why not just take out the cheapest policy? An insurance policy only really comes into play at point of claim, perhaps something serious like a fire or a flood. It is definitely at that point that you will need more than the cheapest policy in order to settle the claim as efficiently as possible.
I think the saying below best sums up what should be the thought process when buying an insurance policy. My advice is don’t fall for marketing gimmicks and take out the best policy possible to cover your investments and prize possessions through someone that knows what they are talking about not a computer generated quote.
“It is unwise to pay too much, but it is worse to pay too little. When you pay too much you lose a little money – that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought for. The common law of business balance prohibits paying a little and getting a lot. It cannot be done. If you deal with the lowest bidder it is well to add something for the risk you run, and if you do that you will have enough to pay for something better. John Ruskin (1819-1900)”