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Outsurance looks to brokers for future growth

By Kayser Baird | Durban | October 30, 2014

OutsuranceAfter years of attacking the broker model of insurance and encouraging client’s to supposedly save money by “cutting out the middle man” – Outsurance looks set to change their core strategy by adopting the broker model themselves.

Outsurance have just released a job advert on LinkedIn for somebody to set up a broker distribution model for their Commercial Insurance product, something that is almost certain to be seen as a U-turn on one of their core branding pillars – cut out the middle man, save money.

We called Outsurance today and Tanya Els, Business Client Care Manager, confirmed that Outsurance recognised that some of their clients “still want the personal touch” and that they would offer their Commercial Insurance products through brokers from January 2015.

Bizarrely, as at today Outsurance still states on their website;

“At Outsurance, we simply don’t see the point of paying brokers fees or commissions. We’d much rather speak to you directly and help you save money in the process!”

One has to wonder if Outsurance’s strategic people work in the same office as their marketing and recruitment people.

The fact that Outsurance is adopting the broker model doesn’t necessarily come as a big surprise. Most countries including the UK and Australia still have short term insurance markets dominated by brokers, particularly in the Commercial Insurance arena. It is not easy for a Direct Insurer to go it alone, particularly for commercial insurance.

If Outsurance now says that broker insurance is better for businesses, then why is direct insurance supposed to be better for individuals? It simply isn’t true that personal client’s don’t need independent advice – the impact to an individual of being incorrectly insured can be devastating.

If Outsurance are abandoning their claim that it is cheaper to cut out the middleman, then what is their value proposition to personal policy holders?

Outsurance have spent considerable time and money planting seeds of doubt in the South African public’s mind about the value of brokers in the insurance industry. This has been based on the weak and misleading premise that taking the broker out of the picture will save you money.

They have been hauled over the coals a number of times over their advertising, with their ethics and integrity being questioned over their tactics. Outsurance have had at least one advert banned by the Advertising Standards Authority, and various other complaints from stakeholders within the industry.

In 2011 Outsurance were found guilty of breach of conduct for their television commercial claiming that their average price for business insurance was cheaper than it’s four closest rivals. When Mutual and Federal challenged the advert, it was found that in fact Outsurance was more expensive than three of it’s rivals. It was found that Outsurance mislead the public with non-factual, non verifiable advertising. Outsurance were forced to display the following statement on their website for 60 days beginning the 1st December 2012;

“The Code of Complaints Committee of SAIA has found that a particular OUTsurance television advertisement was misleading, non-factual and non-verifiable and was therefore in breach of the Code. An appeal against that finding was dismissed. The Ruling and the supplementary Ruling of the Complaints Committee is published in full and can be accessed by way of the following link”.

The rivals that Outsurance were comparing themselves to included insurance companies that had the vast majority of their business insurance written into them by brokers. There is no question that serious damage was done to the direct insurance market and their mantra that it is cheaper to insure direct.

Now it seems that Outsurance will be faced with the unenviable task of explaining to brokers why they spent so much money discrediting their business model, and that they now want to partner with them. Even more difficult may be the general messaging to their broader target market.

What is certain is that there is a lingering question mark around the issues of ethics and credibility and it seems unlikely that there will be a warm reception from the broker market.

Based on the messaging still being displayed on Outsurance’s website and their historic stance against the broker model, the question that remains to be answered is, are brokers in or OUT?

 

 

 

 

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