Avoiding insurance rip-offs

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It's the great insurance swindle, netting insurance companies millions of dollars a year. Now, consumers are fighting back.

Naomi Bruvels is a work-from-home mum who runs consumer website simplesavings.com.au.

She and 86,000 other website members are refusing to be played for fools by insurance companies. Instead, they are saving themselves hundreds of dollars every year.

"I was told that they'd had increased government taxes, there were other extra costs they had to include in and therefore they had no control what they were charging me," Naomi said.

"I disagreed and I actually shopped around and found much better prices. I went back to them and told them this and they agree to reduced my costs."

Brad Zeimer is another customer who's had enough.

"I automatically go onto that insurance company's website and re-input all the information that I've got on the policy, just to check, to find out if they've given me the best premium they can, or it's been inflated," Brad said.

"And every time I've done so, I've always found that it can be anywhere from $60 up to $130 - more if I automatically go ahead and reinsure."

After cross-checking against other companies, Brad called his insurance company's customer service centre, where they spout the same old lines.

"They automatically go through it with me and acknowledge there has been a problem," Brad said. "Always blame their computer systems, but they'll always come down."

Here's how Insurance companies catch you out.

We asked four major insurance companies - AAMI, Allianz, GIO and CGU, to insure an average $27,000 Holden.

Loyal customers who simply pay their renewal are stung the most: an extra $70 by AAMI and around $300 more with Allianz, GIO and CGU.

Generally, online quotes were around $200 cheaper, with CGU having both the most expensive and the cheapest quotes, for exactly the same car.

We then checked home and contents insurance. A $500,000 home and $94,000 contents quote showed big cost differences.

Once again, loyal customers are the biggest losers: AAMI was charging an extra $200 for renewals, while GIO and CGU were in hiding tonight, refusing to confirm a figure despite repeated requests.

CGU had the most expensive cover, over $1300 for a phone quote, while AAMI was les than half of that, offering $500 online.

"Let's be honest, insurance companies want to make as much money as possible and they're counting on the fact that people aren't going to ring up and question what they're paying," Naomi said.

Insurance companies are banking on most customers to simply pay up. But as Brad has discovered, even minutes can save hundreds.

"To investigate probably over about six websites, 20 minutes," Brad said. "And for 20 minutes, you're going to save yourself anywhere around $400 a year."

"When I received my annual review this year, it was $770. By jumping on the internet, on the same company's website, I saved $120."

You can also save on Life Insurance, which can also cover income protection in times of sickness.

Gerald Brown from iselect.com.au compares insurance policies. Unless you're in the business, you may not know that life insurance policies have generally dropped in the last 10 years, leaving many customers paying far more than they need to.

"People have saved 20, 30 per cent of their premiums, just simply by reviewing what cover they're on, because their circumstances have changed," Gerald said.

And it doesn't stop there. It seems everyone is out to get a quick buck from their loyal customers.

Banks are also notorious for slapping on extra fees and charges and those exorbitant penalty fees, which you should be questioning.

In a previous investigation, Today Tonight showed how a growing number of consumers are standing up and taking their business elsewhere, seeking out introductory rates, haggling for a better deal with their lender - and if that fails, transferring their credit card debt to another bank or financial institution, saving thousands of dollars in fees and charges.

The only sting to avoid is making sure the debt can be cleared in the low rate period.

Knowing insurance companies aren't loyal to their customers, the rule is: review renewals and ask for discounts.

"Just remember to shop around because you can save thousands," Naomi said.

Further information

Expert #1: Gerald Brown, Chief Operating Officer from iSelect.
Contact iSelect for further information at www.iselect.com.au or phone 1800 224 007.

Expert #2: Naomi Bruvels, simpleSavings.com.au
Contact details: Simple Savings, PO Box 1777, Buderim QLD 4556
Fax (02) 9012 0288 (international +61 2 9012 0288)
Simple Savings says it finds that Insurance is negotiable, that 80 per cent of members get their renewals and straight away call and get a better deal. About 20 per cent shop around, and come back to their original insurer. They eventually get a better deal with their existing insurer, or they do the big switch. Naomi says the key is to be persistent, and keep asking.

Simple Savings also says insurance is fundamentally a numbers game. Insurance Companies know the numbers, know what people are willing to pay, know how many people will shop around, and know that the overwhelming majority of people will not bother to do anymore than simply pay their renewal form. So they will try to gouge you for all your worth.

Other than shopping around, and never taking market price, another trick they tell you is to sit down every year, see what you need on the policy and shave off the excess. Insurance companies will always over-sell insurance, so it's up to you to make sure you're not paying extra.

An example is home Insurance, they'll oversell, convincing you to add more to the value of your contents. Your home and contents is always going to be worth what it is worth, not more. So if the crunch ever did come and you have to claim, the extra contents you paid for will be worthless, because the company will dispute everything, their job is to pay out as little as possible.

Expert #3: Steve Mickenbecker, Cannex - www.cannex.com.au
Phone: +61 (07) 3837 4100, Fax: +61 (07) 3837 4141

Expert #4: Money-saving customer Brad Zeimer. Brad has saved hundreds of dollars every year by seeking out the best deal for his insurance. Every year, his Insurance bills are bigger than before, but Brad hasn't swapped insurance companies, rather his shopping around has given him the information he needs to bargain with his insurer - who, he says, has pulled the price down every year. Brad has great ideas to save money and is happy to help Today Tonight viewers. Contact Brad: bzeimer@optusnet.com.au