R135,200 payout for written-off R300k car a warning for anyone thinking of cheaper insurance deal

In this weekly segment of bite-sized chunks of useful information, consumer journalist Wendy Knowler summarises news you can use:

A lower insurance premium, but at what cost?

Car insurance premiums can be a killer, especially if you are fairly new behind the wheel and in your 20s.

One way to lower that monthly commitment is to opt for a “voluntary excess” — that’s an amount you agree to pay on top of the compulsory excess.

But it’s not a decision that should be taken lightly, the FAIS ombud (Office of the Ombud for Financial Services Providers) has warned.  It shared a recent case to make its point.

The complainant — 25 years old and a new driver — bought a VW Polo R-Line valued at R336,000 and applied for comprehensive vehicle insurance.

The policy was set up with coverage based on the retail value, along with an excess of R5,000 and a monthly premium of more than R3,000. Dissatisfied with that quote, he switched to another insurer, which allowed him to reduce his premium by agreeing to an extra “voluntary” excess. But that didn’t end well for him.

He had an accident, resulting in the vehicle being written off.

“During the claims process,” the ombud said, “the policyholder was informed that the voluntary excess was set at 55%, significantly reducing the value of the claim.

“The car’s retail value at the time was R306,000, so had just the basic excess amount of R2,500 been deduced, he’d have been paid out R303,500. But that voluntary excess saw another R168,300 being deducted, leaving him with a settlement of just R135,200.”

Unhappy, he approached the FAIS ombud for help.

“When we listened to the sales recordings, we found that the excess provision and details were well explained at the time of purchase,” the Ombud said. “The insurance provider informed him about the 55% voluntary excess, clearly describing how it worked, even using different scenarios. There was no basis for a finding to be made against the insurer.

“The case highlights the importance of clearly appreciating the implications of your decisions.”

Indeed.

How not to buy a container

Old shipping containers are in high demand for conversion into B&Bs, offices and shops. But if you do an online search to buy one, chances are good you’ll land up on the website of a convincing fraudster.

Marge, who is the treasurer of a KwaZulu-Natal environmental NGO, was tasked with buying a 3x3m container for recycling purposes, so she did some Google shopping and was quoted R7,000 plus R2,500 for delivery by a company calling itself “Forest Hill Container Trading”, which she paid, earlier this month.

Two days later she was told she had to pay another R12,450 for insurance, of which R12,000 would be refunded on delivery of the container. She complied, bringing the amount paid to just under R22,000.

But the fraudsters were not about to stop there.

Next, Marge was asked to pay another R15,500 for a “control permit”. It was at that point that she and her fellow committee members realised they may have fallen victim to a scam.

So here’s what to do if you’re in the market for a container: first visit the website of an organisation called “Container Fraud Prevention” to get properly clued up on how to avoid the scammers.

You walk in, you don’t get to cool off

I wish I’d been able to help Caroline and her mother. The former e-mailed me with a sad story of buyer’s remorse.

“My 75-year-old mother has signed a phone contract committing her to paying more than R1,600 per month,” she said. “On her way home and with input from her family, she realised that she wouldn’t be able to afford the monthly subscription for 24 months — she was previously paying about R400 a month on pay-as-you-go.

“I understand there is a week’s cooling-off period after signing a contract. Is that correct, and if so what is required from her side?”

I had to correct her on that widely held misperception.

A five-business-day cooling-off period would only have applied had Caroline’s mother signed up to that contract as a result of some form of direct marketing, such as a telesales call. But as she chose to walk into that cellphone shop and make enquiries about a contract and the phone that went with it, she did not have the benefit of a cooling-off period.

A “change your mind” cooling-off period of seven days also applies when you buy something online, given that you can’t fully engage with a product before committing.

Always demand to see what you’re buying — properly

Here’s yet another story which demonstrates why it’s so crucial not to be in too much of a hurry when making a purchase.

Udesha bought wiper blades for her car in August, from a shop in her area. “It was the first time I had shopped there and needed those blades urgently,” she told me. “The guys in the store told me which wiper blades were right for my car, a Polo Vivo, at a cost of R350. I thought that was quite pricey but for safety reasons I decided to take them.”

Here’s where Udesha failed to protect her rights. “The guy opened the box and didn’t show me the wipers or anything, just pulled it out, looked at it, closed the box and proceeded with the sale.”

When her husband opened the box before installing those blades, he discovered that one was broken. Of course they went straight back to that spares store, but there was no happy ending.

“The staff was extremely rude and accused us of breaking one of the blades during installation,” she said. “The thing is that they never inspected the item in front of me before I bought it and the box was not sealed, so how can it be assumed that we broke the item?

“Is there anything in the Consumer Protection Act that protects consumers from this sort of daylight robbery?” she asked.

The act does require suppliers to sell goods which are fit for purpose for at least six months from the date of purchase: in other words, not defective in any way. And if the goods do prove to be defective you can return them for your choice of a refund, replacement or repair. But there’s no recourse if you break the goods and sadly, in this case, Udesha can’t prove that that wiper blade was already broken when sold to her.

The lesson: check that a product’s box is properly sealed before buying. And if a salesperson makes a show of extracting a product from an opened box, make sure you have a good look at it yourself before purchasing it.

GET IN TOUCH: You can contact Wendy Knowler for advice with your consumer issues via e-mail: consumer@knowler.co.za or on Twitter: @wendyknowler.