Online insurance comparisons do not liberate the buyer from the small print

Most people find the detailed and complex clauses of insurance policies utterly bewildering and often downright intimidating. As such there is an increasing tendency amongst consumers to reduce the process of purchasing insurance to simple price comparison.

In fact, when it comes to insurance, simple price comparison is a dangerous guide as the value of insurance lies in what it covers, not necessarily what it costs. And with insurance companies using new channels, like the internet, to punt their products it is increasingly easy for customers to fall into the trap of instant price-driven comparisons – available at the click of a button.

The ease of online shopping, especially for insurance, “disguises what should be a more complex process of investigation and broader scope of comparison” says Gari Dombo, Managing Director, Alexander Forbes Insurance.

So, regardless of whether you are purchasing insurance on-line, over the telephone or through a broker, it is essential that consumers find out the following things about the cover they are about to purchase:

1. What is, and what is not covered? This is found in the small print. “The exclusion detail is very important to read as policies can be very different” warns Dombo.
2. Who is covered? Is this stated clearly in the policy? Some policies only cover the owner-driver, others nominate other parties, some specifically exclude other parties.
3. What is the excess? Some excesses are expressed as a percentage of value, while others as a percentage of loss. Some will be a flat monetary amount while others will be a percentage of value. In many cases you can buy the excess, a concept called excess buy-back.
4. What is the vehicle insured for? Retail value, market value, trade in value, or a combination? “These all have very different cost and payout implications and purchasers of insurance should understand what they are buying” says Dombo.
5. What is the insurers’ repair philosophy? Does the insurer believe in repairing vehicles with new parts or second hand parts? Will the insurer insist that repairs are done by manufacturer approved repairers to avoid loss of manufacturers’ warranty?
6. To what extend will you be personally liable? For example, “what are you not covered for? What are the exclusions? What are the limits of cover? Look out for a firearms exclusion, wrongful arrest extension, and security company liability extension” explains Dombo.
7. Check the claims paying history and ability of your prospective insurer. Do you have any idea of their claims paying ability? Sometimes friends or other clients refer you and are able to provide first-hand experience of a company’s track record in this regard.

In fact, says Dombo “only once you have used these questions to thoroughly establish that the cover suits your needs should you look at price. Paying a great premium for a policy that does not respond when you have a loss misses the point of insurance.”

In addition to cover and price suitability, you should also consider your potential insurance provider’s reputation for service excellence, especially on claims.

Slick insurance advertisements are often misleading. The internet is no exception in this regard. It often promises consumers the world without thoroughly explaining the cover. It is up to the consumer to consult the insurer directly, or approach a broker, to fully understand the type of cover they are purchasing.

“Not taking the time to understand and engage with the details of cover before purchasing, regardless of whether you are buying online or via more traditional channels is how people end up with unpaid claims” concludes Dombo.