In an article posted in the New Age Newspaper on the 14th of December 2010 unions are purported to seek a total ban on Labour Brokers in South Africa and that the demands are building in strength and momentum. So much so it has been dubbed “The Mother of all Battles”. The method to be used by the Unions is the demand for Section 189 of the Labour Relations Act to be repealed. This section directly deals with temporary employment. Although one does have empathy for the plight of the Unions, in the article they specifically mention Labour Broker’s unwillingness to do salary deductions for unions, and the so-called extorted workers one has to review the impact that such critical changes will have in the job creation front.
One has to understand that life has to occur in balance. Once the one side of the scale is packed to heavy life responds by acting “aggressively” to balance the scale. A typical example of how life and people in South Africa has responded to heavy handed government intervention is in the illegal cigarette market which, at least according to British American Tobacco’s advertising campaign, is spiraling out of control and has suddenly become the largest funder of other more violent and “less profitable” crimes like robbery, gun running and drugs. Is the assumption that this is like a gateway crime.
We cannot at all be surprised by the growth of this “market segment”, as approximately 50% of cigarette turnover (not profit) is passed on to government in the form of exorbitant sin taxes. These excessive taxes make it virtually impossible for competitors to enter into the market with cheaper alternatives, without breaking the law. Therefore heavy handed government involvement has created an economy conducive to trading, smuggling and selling illegal cigarettes whilst protecting and building a monopoly state in this R 25 Billion per annum industry.
Indulging me to use the above as an example, one has to ponder if such over protectionism in the labour market will have a positive or negative effect and what the direct effect will be on job creation. All our major job creation industries are currently shedding jobs at a massive scale. In Novembers figures an approximate 18,000 jobs was shed in the formal industry(Banking and Manufacturing the largest culprits). However agency work or labour brokering (governed by Section 189) has been creating jobs at a rate of 5%+ per annum. Is this not already a sign that an over regulated environment is creating opportunities for business men in South Africa? Is it not proof that additional regulation may, as in the cigarette industry, cause a form of illegal labour operations? Before you laugh out loud, be prudent in considering the fact that the Mafia controlled US Cities and even states, due to the ”ownership” of unions.
It cannot be ignored that about 7% of South Africa’s workforce is currently employed in the Labour Brokering environment and that this amount is only set to grow, if left to operate. However if this industry is going to be declared illegal would the Private Sector, in reality, absorb these employees? What would business to do repair the scales of balance? Another point that is prudent to investigate is true and honest temporary employment. If Project Management, the agricultural industry or contract based businesses are not going to be allowed to align their staffing strategy with their actual demands, which by default varies from time to time, it may very well cause these industries immense damage and, at least in my mind, cause these industries to seek alternatives to employing people. Items like mechanization, automation and technology deployment would become the leading factor in business success and not staff deployment and training. This does not show a rosy picture for the blue collar worker the union is so set to protect, or at least protect salary deductions from.
In conclusion, it should be considered whether the “evil” of labour brokering is not a “necessary evil” to stimulate our economy’s most dire demand, job creation. Maybe better and focused regulation of temporary workers and labour brokers would be a more viable option. Maybe more emphasis on training and social investment by these firms may protect our economy from the short term damage of job losses, whilst encouraging future growth for our unemployment figures.
Saturday, December 25, 2010
Tuesday, July 13, 2010
My sincere condolences to Uganda and its people
I would like to extent my sincere condeliences and best wishes to all people affected by the bomb blasts in Kampala.
May we soon live in a world with humanity, honour and compassion where outrageous acts like these do not have any place in the world anymore.
My thoughts and prayers are with all those that have lost family and friends and may prayer is that the peacefull and loving nature of the Ugandan people remain intact as an example to the rest of the world.
Friday, June 11, 2010
What is Invoice Discounting
Invoice discounting is a common finance tool or arrangement with a finance company or bank. It allows the bank to advance monies to a business against its debtors (customers) thus helping cash flow.
This very attractive option in financing your business is somewhat overlooked, however it is a safe, cost effective and fast way to insure that your company has a good and solid cash flow.
This could be an extremely viable funding option available to companies that provide a product or service on credit terms to their customers. The purpose of the finance is to give you access to immediate funds, without having to wait for the customer to pay the invoice. This is particularly beneficial to those of you who are in a growth period and committing more working capital to customer credit \ debtors.
The company lending you the money will agree that for all invoices raised you will have a certain percentage available of the value of the invoice at you disposal. You do not necessarily have to utlisie the full available amount (credit limit) immidiately but have the assurance that you can draw on the facility when needed.It can therefore act similar to an overdraft just with the added advantage that it is not directly influences by collateral as per bank requirements.
The process of getting a credit limit in place is actually very simple: The ‘factor’ (the lending company) is disclosed to all of your customers, with your customers paying the factor direct. The factor will collect all amounts due and offset this amount against your account. The balance of the invoice will be paid into your account, less the fee and interest.
To obtain such a facility you can log onto www.fogwell.co.za
This very attractive option in financing your business is somewhat overlooked, however it is a safe, cost effective and fast way to insure that your company has a good and solid cash flow.
This could be an extremely viable funding option available to companies that provide a product or service on credit terms to their customers. The purpose of the finance is to give you access to immediate funds, without having to wait for the customer to pay the invoice. This is particularly beneficial to those of you who are in a growth period and committing more working capital to customer credit \ debtors.
The company lending you the money will agree that for all invoices raised you will have a certain percentage available of the value of the invoice at you disposal. You do not necessarily have to utlisie the full available amount (credit limit) immidiately but have the assurance that you can draw on the facility when needed.It can therefore act similar to an overdraft just with the added advantage that it is not directly influences by collateral as per bank requirements.
The process of getting a credit limit in place is actually very simple: The ‘factor’ (the lending company) is disclosed to all of your customers, with your customers paying the factor direct. The factor will collect all amounts due and offset this amount against your account. The balance of the invoice will be paid into your account, less the fee and interest.
To obtain such a facility you can log onto www.fogwell.co.za
Saturday, May 29, 2010
How to calculate your break even
Many business owners do not understand the financial side of their business and actually do their best to avoid it, as it is perceived as a complex and dificult process. In this article the author aims to address just one of the most business criticial financial analysis that needs to be done for you to better understand your business. Whether you are in financial services, selling products wholesale or run a consulting business. Knowing when your business actually breaks even is extremely critical. What is the break-even point? The break even point is defined as the point where business sales or revenues (your income) is equal to your business expenses. Therefor there is no profit made nor no loss incurred at the break-even point.
This figure is imperitive for any business owner in the managing of the business since the break-even point is the lowest limit of profit when setting prices and determining business margins. Obviously the break-even point becomes very important when calculating a strategy for net profit or quoting on new projects or even introducing new products to your business. Calculating your break even amount is actually extremely simple, you merely calculate your operational expenses. However I believe it is prudent to take the following factors into consideration when calculating your break even and I have my own little break even calculator, although it may not be academically correct it has worked well in every business I saw it introduced. Break Even = Operational Expenses + Contigency Provision + Cost of Re-Capitalisation + Minimum Entrepreneurial Fee required. Now lets unpack that in a little more detail:
Operational Cost = The total running cost of your business.
Contigency Provision = An amount of money you put aside to isnure break even in the immidiate future. Either by being able to use it to address some unforseen circumstances or to have surplus capital available to "cover" yourself.
Re-Capitilisation = How do you cope with growth? How do you replace that machine you bought cash. You recapitlisation savings is used to insure that when old machines are reduntant you do not need to suddenly scramble for cash.
Entreprenerial Fee = The minimum entrepreneurial fee is the minimum amount required by the entrepreneur to keep himself going. Do not place your wanted income hear, but the minimum income required.
Now that you have a true break even margin you need to work out how you are going to get there. This is done by calculating your break even margin.The break-even margin is a ratio and this ratio shows the gross-margin factor for a break-even condition. The formula is also fairly simple. You take your total expenses and divide by net revenues and multiply this by 100 to get a percentage. This ratio is extremely helpful when setting your selling prices, in the tendering process and when negotiating contracts with vendors and accounts.
By understanding your business break-even point and the required break-even margin business owners can truly understand the impact of decisions. In purchasing, costs can be lowered by bulk purchasing, negotiating price/ terms or finding new suppliers. Revenues can be improved by increasing value to the customer or offering non-price concessions. It must at all times be remembered that increasing profits by simply increasing margins, therefore selling price, could be a very risky strategy. Unless the consumer perceives higher value from the product or service, the consumer may not be willing to pay these higher prices.
This figure is imperitive for any business owner in the managing of the business since the break-even point is the lowest limit of profit when setting prices and determining business margins. Obviously the break-even point becomes very important when calculating a strategy for net profit or quoting on new projects or even introducing new products to your business. Calculating your break even amount is actually extremely simple, you merely calculate your operational expenses. However I believe it is prudent to take the following factors into consideration when calculating your break even and I have my own little break even calculator, although it may not be academically correct it has worked well in every business I saw it introduced. Break Even = Operational Expenses + Contigency Provision + Cost of Re-Capitalisation + Minimum Entrepreneurial Fee required. Now lets unpack that in a little more detail:
Operational Cost = The total running cost of your business.
Contigency Provision = An amount of money you put aside to isnure break even in the immidiate future. Either by being able to use it to address some unforseen circumstances or to have surplus capital available to "cover" yourself.
Re-Capitilisation = How do you cope with growth? How do you replace that machine you bought cash. You recapitlisation savings is used to insure that when old machines are reduntant you do not need to suddenly scramble for cash.
Entreprenerial Fee = The minimum entrepreneurial fee is the minimum amount required by the entrepreneur to keep himself going. Do not place your wanted income hear, but the minimum income required.
Now that you have a true break even margin you need to work out how you are going to get there. This is done by calculating your break even margin.The break-even margin is a ratio and this ratio shows the gross-margin factor for a break-even condition. The formula is also fairly simple. You take your total expenses and divide by net revenues and multiply this by 100 to get a percentage. This ratio is extremely helpful when setting your selling prices, in the tendering process and when negotiating contracts with vendors and accounts.
By understanding your business break-even point and the required break-even margin business owners can truly understand the impact of decisions. In purchasing, costs can be lowered by bulk purchasing, negotiating price/ terms or finding new suppliers. Revenues can be improved by increasing value to the customer or offering non-price concessions. It must at all times be remembered that increasing profits by simply increasing margins, therefore selling price, could be a very risky strategy. Unless the consumer perceives higher value from the product or service, the consumer may not be willing to pay these higher prices.
Wednesday, May 26, 2010
A Dynamic Group that cares
Yesterday I had the privilege, nay honour of doing a seminar to the people of Dynamic Vision Optometrist network on Finance for non financial people. I would like to say that it was without a doubt one of the most pleasant experiences in my training career.
Not only did I enjoy listening to a couple of other dynamic speakers that have an incredible passion towards their business but I was fortunate enough to get an insider’s view of how this industry ticks and works. The most impressionable part of the experience was the caring nature of all the parties attending. Caring for their patients, caring for other and caring deeply about their businesses, and it was reassuring to see this high level of care and passion in such a large organisation.
I would again like to thank Dynamic Vision for the opportunity and the kind words after my little accident the morning.
You guys are fantastic.
Not only did I enjoy listening to a couple of other dynamic speakers that have an incredible passion towards their business but I was fortunate enough to get an insider’s view of how this industry ticks and works. The most impressionable part of the experience was the caring nature of all the parties attending. Caring for their patients, caring for other and caring deeply about their businesses, and it was reassuring to see this high level of care and passion in such a large organisation.
I would again like to thank Dynamic Vision for the opportunity and the kind words after my little accident the morning.
You guys are fantastic.
Monday, April 12, 2010
Outsourcing vs Labour Brokering
Especially in South Africa labour brokering is often confused with outsourcing and the biggest culprits in promoting this myth is the labour brokering industry itself. Now I would like to state very clearly that I am not against labour brokering and I am a firm believer that there is an important place for the industry in South Africa. That said I think it is prudent to ensure that the two very different industries are not confused.
Firstly, labour brokering is the provision of staff on an outsourced basis, whilst outsourcing is the fulfilling of a function within which a staffing solution may be provided. The methodology and profit generation of these industries is vastly different. Allow me to explain in slightly more detail.
A labour broker earns its revenue from employing and deploying as many staff members as possible. The profits are generated from invoicing their clients more than what they pay the employee. The biggest reason a company is willing to pay a premium for this service is the “passing-on” of risks associated with employing staff and in some cases the increased costs, if any, can be justified by the decreased administration requirement.
A true outsourcing company, on the other hand, generates its revenue from addressing the need of the company within a function at as low a cost as possible and charging the client a premium for that service. Usually at a lower rate than employing staff to fulfil that function. The focus of the outsourcing company is therefore not on their clients staffing requirement but rather on the function that needs to be fulfilled.
So in other words the outsourcing company generates its margin from increasing its efficiency and by leveraging the intellectual capital within the company. For example using better software and more expensive staff than what its clients could afford and sharing these resources with more than one client. On the other hand the labour broker generates its margin from its administrative abilities and from decreasing legal risk.
So which one should your company choose? Simple, it depends on your need. If you require a warm body and do not want litigation risk and the administrative head ache of employment, labour brokering is a viable option for you. If you on the other hand require a function within your company to be managed more effectively and at lower cost outsourcing should then be looked at.
In conclusion, both industries have an important place in the South African economy and address the needs of companies to reduce risk and potentially costs. That said they should not be confused or pit against each other.
Firstly, labour brokering is the provision of staff on an outsourced basis, whilst outsourcing is the fulfilling of a function within which a staffing solution may be provided. The methodology and profit generation of these industries is vastly different. Allow me to explain in slightly more detail.
A labour broker earns its revenue from employing and deploying as many staff members as possible. The profits are generated from invoicing their clients more than what they pay the employee. The biggest reason a company is willing to pay a premium for this service is the “passing-on” of risks associated with employing staff and in some cases the increased costs, if any, can be justified by the decreased administration requirement.
A true outsourcing company, on the other hand, generates its revenue from addressing the need of the company within a function at as low a cost as possible and charging the client a premium for that service. Usually at a lower rate than employing staff to fulfil that function. The focus of the outsourcing company is therefore not on their clients staffing requirement but rather on the function that needs to be fulfilled.
So in other words the outsourcing company generates its margin from increasing its efficiency and by leveraging the intellectual capital within the company. For example using better software and more expensive staff than what its clients could afford and sharing these resources with more than one client. On the other hand the labour broker generates its margin from its administrative abilities and from decreasing legal risk.
So which one should your company choose? Simple, it depends on your need. If you require a warm body and do not want litigation risk and the administrative head ache of employment, labour brokering is a viable option for you. If you on the other hand require a function within your company to be managed more effectively and at lower cost outsourcing should then be looked at.
In conclusion, both industries have an important place in the South African economy and address the needs of companies to reduce risk and potentially costs. That said they should not be confused or pit against each other.
Thursday, April 1, 2010
Proper Corporate Governance still a big obstacle for Africa
Africa has seen massive failures in Public Private Partnerships, donor funding that was misappropriated on large scales and project that have all the hopes and dreams of creating jobs and prosperity for its people never being implemented passed the planning phase.
At least this is the thought of most international investors and donors. The successes of many projects are sadly far over shadowed by the failures of others and some of these on spectacular scale. In a fairly recent trip to Uganda I was asked to become involved in a government backed fund raising scheme for Hydro Electricity, the shocking reality is that these projects have been available to investors for years with virtually no takers.
One has to wonder why? The reality is that Africa has ignored Corporate Governance and it is costing the continent growth on a spectacular scale.This is even apparent in South Africa, where we have some of the most progressive codes in corporate governance in the world, in the form of the old King II and now the King III codes. By applying these codes one can effectively manage projects, organisations, partnerships and companies with exquisite corporate governance. The failure to apply these codes is clearly visible in the failures of most state owned company boards, I don’t think it is going to take an avid news reader to think of at least five “para-statels” who’s boards have failed dismally and in the private sector it could also be visible in the board failure of Pioneer Foods.
With the entire continent requiring massive inward investment, donor funding and progressive projects it is clearly time for leaders in both the business and the government sector to embrace proper corporate governance and to take the plight of all stakeholders involved seriously. Africa needs to instil faith in itself and grow trust and respect from the outside community. The only way this can be achieved is by implementing proper corporate governance even in its most basic activities.
At least this is the thought of most international investors and donors. The successes of many projects are sadly far over shadowed by the failures of others and some of these on spectacular scale. In a fairly recent trip to Uganda I was asked to become involved in a government backed fund raising scheme for Hydro Electricity, the shocking reality is that these projects have been available to investors for years with virtually no takers.
One has to wonder why? The reality is that Africa has ignored Corporate Governance and it is costing the continent growth on a spectacular scale.This is even apparent in South Africa, where we have some of the most progressive codes in corporate governance in the world, in the form of the old King II and now the King III codes. By applying these codes one can effectively manage projects, organisations, partnerships and companies with exquisite corporate governance. The failure to apply these codes is clearly visible in the failures of most state owned company boards, I don’t think it is going to take an avid news reader to think of at least five “para-statels” who’s boards have failed dismally and in the private sector it could also be visible in the board failure of Pioneer Foods.
With the entire continent requiring massive inward investment, donor funding and progressive projects it is clearly time for leaders in both the business and the government sector to embrace proper corporate governance and to take the plight of all stakeholders involved seriously. Africa needs to instil faith in itself and grow trust and respect from the outside community. The only way this can be achieved is by implementing proper corporate governance even in its most basic activities.
Tuesday, March 16, 2010
Up and coming
My new website will be launching soon. Please watch this space for new information, I look forward to getting my 2010 underway and assisting you, my business friends, with advice, training and support where you would like that I can assist.
Please feel free to contact me if you require any additional information.
Please feel free to contact me if you require any additional information.
The pleasantries of the unpleasant
Owning and running your own business can sometimes be as much fun as a root canal and with the constant changes it feels like we are running to the dentist every second day asking him to please provide us with this liberating procedure over and over again.
From Eskom kindly giving us an electrical epidural in price hikes, exorbitant sin taxes making the basic pleasures, like smoking a cigarettes to avoid insanity, un affordable for most of us “other fellla’s”. One can be excused for thinking that most of us should rather spend our time in a hospital for the clinically insane. We are banging our heads against a brick wall anyway !
But let’s face it, once you had your own business you struggle to find an incentive (apart from the massive luxurious thing called a pay check) to go back to the 8-5 breaker of innovation.
But then every now and again a light appears, and then we understand the reason why we chose this insane life. For the couple of people that know me and have been privy to the last couple of months of corporate sabotage and obvious and blatant attempts to block my business and its sale. Will know that I was seriously considering the that en-suite room at the local clinic for the insane. More shockingly the rider on the white horse did not come in any expected form, but from a segment of the industry that I always regarded as my opponents. A trade union. Yes, you heard me correctly a trade union.
To close off, thank you to all that supported my during this last couple of months. Thanks to all that was considerate and understanding and even empathetic. Now we are going to enjoy the spoils of our labour and the reward for coping during this time.
P.S. – This may be personal but I thought it prudent to share.
From Eskom kindly giving us an electrical epidural in price hikes, exorbitant sin taxes making the basic pleasures, like smoking a cigarettes to avoid insanity, un affordable for most of us “other fellla’s”. One can be excused for thinking that most of us should rather spend our time in a hospital for the clinically insane. We are banging our heads against a brick wall anyway !
But let’s face it, once you had your own business you struggle to find an incentive (apart from the massive luxurious thing called a pay check) to go back to the 8-5 breaker of innovation.
But then every now and again a light appears, and then we understand the reason why we chose this insane life. For the couple of people that know me and have been privy to the last couple of months of corporate sabotage and obvious and blatant attempts to block my business and its sale. Will know that I was seriously considering the that en-suite room at the local clinic for the insane. More shockingly the rider on the white horse did not come in any expected form, but from a segment of the industry that I always regarded as my opponents. A trade union. Yes, you heard me correctly a trade union.
To close off, thank you to all that supported my during this last couple of months. Thanks to all that was considerate and understanding and even empathetic. Now we are going to enjoy the spoils of our labour and the reward for coping during this time.
P.S. – This may be personal but I thought it prudent to share.
Friday, January 29, 2010
Using the Small Claims Court
In many cases a lot of us feel like justice is far from reach. It feels like we have no recourse against poor workmanship, friends lending money and even in the case of micro business, defaulting creditors. To prove my point, how many times have you decided not to act on a claim of R 4000-00 or so because the lawyers costs more....?
Little of us know about the cheap, easy and simple process available to all South African citizens needing civil/financial recourse. This prince coming to save us from the evil micro bad guys is found in the form of the small claims court, and as stated it is available to all SA citizens.
So how does it work? Simple the small claims court allows smaller civil disputes to be resolved with out the expensive and slow process of taking normal civil action using the magistrates court. It operates outside of business hours and the "judge"is a practicing attorney. You do not need a lawyer, in fact they are not allowed! You do not need to speak legal! You do not need to file expensive papers in latin of "high" english. All you need is to contact your local small claims court, obtain the relevant notice drafts and wallah you and the person you have a dispute with can slug it out (man-2-man) in the small claims court where an attorney will give a judgement that is just as powerful as that of the magistrates court.
Who can use the small claims court? Any natural person with a claim smaller than R 7,000-00 (this amount is being reviewed) can approach the small claims court for relief.
What can a person sue for?. Any civil dispute, in other words any dispute that has a desired end result of financial relief. Broken equipment, bad workmanship, debt, outstanding invoices (only in the case of Sole Proprietors & Partnerships, no CC's or Companies).
Who cannot sue?. A juridictional entity is not allowed to seek relief from the small claims court. Again in more simple terms no CC's, companies or trusts. That said as an individual you can call your dispute to the small claims court against any legal entity.
What can I not sue for?. As a legal entity (CC, PTY or trust) you cannot approach the small claims court. You cannot approach the small claims court for financial relief higher than R 7,000 and you cannot send your lawyer on your behalf. The aim of the court is to resolve small disputes between individuals to insure justice is accessible to all.
What happens if my claim is more than R 7,000?. In the event that your claim is fractionally higher than the prescribed limit, as stated it us currently under review, you can choose to forfeit your right to the balance. As an example: If your past room mate leaves your house without paying his portion of the rent and the lovely fella also decided to take the washing machine causing you damages of R 8,350-00. You can approach the small claims court and choose to forfeit your right to the balance. If you therefor get a successfull verdict the judgement will only be for R 7,000-00.
Who do you approach to have a dispute settled by the small claims court?. Any good attorney or legal services company will be able to provide you with the contact details of the small claims court in your area. Do not use intermediaries or consultants, it is a total waste of money. However if you want consult with an attorney about the process and facts of your case.
Little of us know about the cheap, easy and simple process available to all South African citizens needing civil/financial recourse. This prince coming to save us from the evil micro bad guys is found in the form of the small claims court, and as stated it is available to all SA citizens.
So how does it work? Simple the small claims court allows smaller civil disputes to be resolved with out the expensive and slow process of taking normal civil action using the magistrates court. It operates outside of business hours and the "judge"is a practicing attorney. You do not need a lawyer, in fact they are not allowed! You do not need to speak legal! You do not need to file expensive papers in latin of "high" english. All you need is to contact your local small claims court, obtain the relevant notice drafts and wallah you and the person you have a dispute with can slug it out (man-2-man) in the small claims court where an attorney will give a judgement that is just as powerful as that of the magistrates court.
Who can use the small claims court? Any natural person with a claim smaller than R 7,000-00 (this amount is being reviewed) can approach the small claims court for relief.
What can a person sue for?. Any civil dispute, in other words any dispute that has a desired end result of financial relief. Broken equipment, bad workmanship, debt, outstanding invoices (only in the case of Sole Proprietors & Partnerships, no CC's or Companies).
Who cannot sue?. A juridictional entity is not allowed to seek relief from the small claims court. Again in more simple terms no CC's, companies or trusts. That said as an individual you can call your dispute to the small claims court against any legal entity.
What can I not sue for?. As a legal entity (CC, PTY or trust) you cannot approach the small claims court. You cannot approach the small claims court for financial relief higher than R 7,000 and you cannot send your lawyer on your behalf. The aim of the court is to resolve small disputes between individuals to insure justice is accessible to all.
What happens if my claim is more than R 7,000?. In the event that your claim is fractionally higher than the prescribed limit, as stated it us currently under review, you can choose to forfeit your right to the balance. As an example: If your past room mate leaves your house without paying his portion of the rent and the lovely fella also decided to take the washing machine causing you damages of R 8,350-00. You can approach the small claims court and choose to forfeit your right to the balance. If you therefor get a successfull verdict the judgement will only be for R 7,000-00.
Who do you approach to have a dispute settled by the small claims court?. Any good attorney or legal services company will be able to provide you with the contact details of the small claims court in your area. Do not use intermediaries or consultants, it is a total waste of money. However if you want consult with an attorney about the process and facts of your case.
Thursday, January 7, 2010
Direct Insurance, is it the right move?
We as consumers are being bombarded with advertising, mock TV shows s and call centre telling us that it is better to insure directly and cut out the “expensive” middle man. A large emphasis is placed on the fact that they are irrelevant in the short term insurance realm and even more that they are a pure burden to the consumer. A recent advert comparing a broker to a fish and chip sales person is a clear indication that little regard is being placed on the role of financial advisors and brokers within the short term insurance industry.
The prudent question I believe we need to ask ourselves is whether we believe this propaganda and whether we would want to trust a call centre operator with insuring our valued assets and now even our lives. Let’s take the following points into consideration when unpack direct insurance for ourselves, ignoring propaganda.
It does not take a rocket scientist to understand that the very call centre operator assisting you in obtaining your insurance is in fact a low level employee, irrelevant of earnings, within the company. They are selling high volumes of policies and therefore making it impossible to remember a little thing like your name. If you have a dispute on your claim who would you speak to? The answer is very simple, their legal department. One young man, who alleges on Hellopeter.com that he was effectively bullied by a large direct insurer’s in house legal team into signing documents that eventually led to his claim being denied is proof of that.
Now no one is claiming that the young man is talking the truth about the matter or that the insurance company is in fact bullying clients into not paying claims, the fact that is being brought across is merely that when a dispute arose his communication point was moved from the friendly voice at the call centre to the legal department, an intimidating place for any non legal professional.
Now bringing that into comparison with a broker environment one needs to understand that your broker would be your port of call, not his legal department. If it is warranted that a legal department of an insurer has to get involved you would at least be “protected” if not just escorted by your broker. Your broker is also an individual with a larger vested interest in your well being and naturally concerned with you cancelling other policies with him. He or she is not just a voice.
I would like to re-iterate that this article is not aimed as an attack on direct insurance, although I must convey my surprise that the broker industry has not attacked back with similar vigour. It is merely aimed at providing some perspective within the propaganda.
The prudent question I believe we need to ask ourselves is whether we believe this propaganda and whether we would want to trust a call centre operator with insuring our valued assets and now even our lives. Let’s take the following points into consideration when unpack direct insurance for ourselves, ignoring propaganda.
It does not take a rocket scientist to understand that the very call centre operator assisting you in obtaining your insurance is in fact a low level employee, irrelevant of earnings, within the company. They are selling high volumes of policies and therefore making it impossible to remember a little thing like your name. If you have a dispute on your claim who would you speak to? The answer is very simple, their legal department. One young man, who alleges on Hellopeter.com that he was effectively bullied by a large direct insurer’s in house legal team into signing documents that eventually led to his claim being denied is proof of that.
Now no one is claiming that the young man is talking the truth about the matter or that the insurance company is in fact bullying clients into not paying claims, the fact that is being brought across is merely that when a dispute arose his communication point was moved from the friendly voice at the call centre to the legal department, an intimidating place for any non legal professional.
Now bringing that into comparison with a broker environment one needs to understand that your broker would be your port of call, not his legal department. If it is warranted that a legal department of an insurer has to get involved you would at least be “protected” if not just escorted by your broker. Your broker is also an individual with a larger vested interest in your well being and naturally concerned with you cancelling other policies with him. He or she is not just a voice.
I would like to re-iterate that this article is not aimed as an attack on direct insurance, although I must convey my surprise that the broker industry has not attacked back with similar vigour. It is merely aimed at providing some perspective within the propaganda.
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