Lessons from the Tyre Industry for the General Insurance Industry

I recall quite plainly when the then NZI Insurance started advertising insurance on buses, my then state manager, Mr Russel Hay of the General Accident Insurance could not believe that any insurer would discredit the industry by advertising on the side of a bus. As a young man I did not see anything wrong with this but Mr Hay thought that this degraded the great profession of insurance and damaged the image of insurance generally as being a cut above commodities.

Oh how the times have changed!

Now, we see so many advertisements for Insurance in so many different media channels it isn’t funny. But, what message are we portraying to our customers?

I would suggest that first, insurance is easy, second, it doesn’t matter which policy you have, it is all about the price or the free theatre tickets or discount vouchers for an electrical store and lastly that loyalty does not pay and that you get a discount for moving insurers. The reality is that insurers do not make money on the average client in the first year that they have them, it usually takes 3 years with a good claims history before there are real profits to be made from the Insured. To encourage customers to chop and change year after year is not good for insurers, nor do I believe it is good for the Insured.

My advice to any insured is to pick an insurer and develop a long term sustainable relationship with them.

As a young claims officer, we always checked how long the Insured was with us before making a decision on whether or not to deny a claim. With many insurers, the length of time you have been with them makes no difference to whether or not a claim will be denied, and certainly they are being penalised premium wise for staying with them.

To me, the industry has reached a new low with the recent release of the BizCover ad with someone cutting the most disgusting toenails. To me, it is so repulsive that I immediately changed the channel.

Compare that ad with the way that Bridgestone Tyres are advertising. It is creative and sends a powerful and important message. They are NOT advertising that they have the cheapest tyres, they are explaining the benefit of quality tyres when it matters.

Ironically, one of the first claims that I handled on setting up LMI Group was for a tyre retreading company who had a major fire. His belief was that he faced the same dilemma as the insurance industry, everyone buys his product not realising how important that product is until such time as they really need it. In the case of tyres, it is when you have to slam on the brakes and you expect them to safeguard your family, car and whatever it is you are trying to avoid hitting from injury or damage. In effect it is selling their tyres from a risk management perspective.

Insurance is exactly the same, it is all well and good looking for the cheapest and simplest policy until you really need it.

Just like tyres, insurance is about protection. Good insurance is about managing risk.

In now 47 years of my handling claims. In that time, only a handful of customers have ever discussed the premium with me after a claim, and in the few cases that have, in every case, it has been a negative experience not a positive. That is, they say, “I moved from this insurer to that insurer and saved X dollars, tell me again Allan, how much has that just cost me?” The answer is always at tens of thousands of dollars more.

Maybe I am just unlucky, but I have not met a single person who has had a good claims experience with the insurer that offers discounted theatre and other such benefits.

My recommendation to any insurer reading this is look to engage the same agency that put together the Bridgestone ad to advertise your products and brand insurance. The advice to any insured out there is, if you want to buy theatre tickets, buy theatre tickets, if you want to buy protection, speak to a quality insurance broker and or insurer and look at the coverage and claims service, not just the price. Remember, LMI ClaimsComparison.com is a free service unique to Australia to help you gauge the claims service you can expect from an insurer.

As for Mr Hay, I am sure he would turn in his grave at the way we now advertise / market insurance protection.

4 responses to “Lessons from the Tyre Industry for the General Insurance Industry”

  1. Roland Starr says:

    Re Bizcover, have a client who likes buying things on the net and he saw the ad and went online to get a quote. The quote from QBE came back quite cheaper and he asked why. I did a QBE quote and nowhere near the terms they offered. I told him to get them to send the actual terms not just a brief summary and the cost. They advised that they don’t do that and he’d only get the schedule after getting cover and paying the premium, monthly I assume. He was clever enough to arc up at that and challenged them and asked if he was unhappy would he get a refund and was advised not a full refund, it would be less their fees but they wouldn’t say what the fees were. So not only is the ad disgusting but their business practices are similar.

  2. Lori Messori says:

    Thanks Allan.

    Enjoyed the blog on Insurance Advertising. Can’t say the same for the toenails clip (see what I did there?)

    You may recall an advert for car insurance (Swiftcover) many years ago featuring singer Iggy Pop leaping about and boasting he had “insurance on his insurance”. The advert was banned by the advertising watchdog at the time.

    The Advertising Standards Authority (ASA) ruled that the Swiftcover advert was misleading following complaints the singer would not have been able to buy cover since the insurer excluded people working in the entertainment industry.

    The ASA received complaints about the advert from viewers who said it was misleading because it was suggested Iggy Pop was insured by Swiftcover. In the advert, the musician said: “I got it swiftcovered. I got insurance on my insurance!”

    Also pays to tell the truth in advertising.

  3. Allan says:

    Hi Roland. I am very surprised that if this is all correct that the practice is legal. I am only saying this as I have not tried to ring them myself. I would have thought they need to provide a product disclosure statement and or have some sort of cooling off period if they do not. That would be the fair thing to do. Surely there is a duty of disclosure on both parties. Going back to Lord Mansfield’s judgment delivered in 1766 (22 years before Captain Arthur Phillip set up a colony in Sydney, enshrined the Australian Insurance Contracts Act, it states when it comes to insurance: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.”

  4. Allan says:

    HI Lori, first up welcome back to broking. I hope you enjoy your time at Midland. They are a great company in all my dealings. I hope you are using those great tools from LMI to provide the right advice to your clients :).

    Truth in advertising is always important but never more than in insurance which as you would have heard in all the forums we worked together on, based on utmost good faith.

    I was really surprised to see that the toenail ad was nominated for some award. I could not believe it and then the cynic in me started to wonder if advertising companies are more interested in winning awards than in the way they portray the product or industry.

    What would I know. I am claims guy, not in sales and marketing. Hold on, didn’t I just start by doing a shameless plug on my own products :)!

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