Insurance company Youi has been fined $320,000 for misleading consumers with ambush sales tactics.
The Commerce Commission filed 15 sample charges relating to misrepresentations made to consumers between July 2014 and
February 2016.
South African based insurer Youi, which has operated in New Zealand since 2014, previously pleaded guilty to charges
that it:
· made false or misleading representations on its website regarding consumers’ ability to obtain a quote online
· made false or misleading statements during telephone sales calls with consumers, including telling them bank or credit
card details were required to generate a policy quote
· asserted a right to payment for unsolicited insurance policies by sending letters demanding payment and/or debiting
consumers’ bank or credit card accounts without their express permission or knowledge
· sent invoices to consumers in relation to unsolicited insurance policies that did not specify that the consumer was
under no obligation to pay for the policies.
The Commerce Commission investigation was launched as a result of a year-long investigation by freelance journalist
Diana Clement.
Clement first uncovered breaches of the Fair Trading Act by Youi whilst writing an article for the New Zealand Herald. She made a “mystery shop” call to Youi looking for a quote on a motor vehicle. Despite revealing herself as a
journalist three minutes into the call, the staff member claimed falsely that Youi’s computer system couldn’t produce a
quote without payment details being entered. Youi went on to debit $592 from Clement’s Visa Card without permission.
“I presumed at the time that it was a one-off mistake, and Youi management claimed that it was a single rogue employee.
But as soon as my article was published victims started coming forward,” says Clement.
“Then the first of around eight staff members made contact and told me a story of ambush selling so outrageous that it
was almost unbelievable. Over the next few months, however I collected hundreds of complaints about this company. Rather
than being a one-off rogue employee, who had mis-sold to just me, the extraordinary sales methods were and used by Youi
staff across South African, Australian and New Zealand offices.
“Staff told me again and again that the sales methods that they were pressured to use to ambush clients had been
schooled into them by managers. Clement’s findings were published in a two-part exposé on Interest.co.nz, which can be
read here and here.
“As well as using pressure sales and ambush tactics to sell policies, the company did, and still does continue to sell policies that simply don’t cover the basics. The standard household contents policy, for example, doesn’t include away from home cover and staff members routinely
didn’t tell customers this. The commission sales structure, which Youi calls “performance based salary” discouraged the
sale of these “extras” that are simply part of the standard policies with all leading insurers in New Zealand. Staff
members were dis-incentivised to make customers aware of these “extras” because they pushed the premium up to levels
where customers wouldn’t buy and consequently the staff member wouldn’t get any commission.
“Other ways that staff members routinely reduced premiums in order to clinch the sale and therefore their commission
was to do what they called “maniping” (manipulating). Desperate to earn bonsues, staff would “manip” the information
entered into the computer.
“Staff members realised, for example, that certain models of car were expensive to insure. They would as a result say
they couldn’t find that model on the computer and suggest they input another model in the meantime. This sleight of hand
that customers often didn’t remember until it was pointed out to them meant the premium was cheaper. What customers
failed to realise was that the change of vehicle meant they would not be covered by the policy should they have to
claim.
“In the calls I listened to sales advisers repeatedly said the words they wanted customers to agree to leading to
answers that would reduce cover and the premium or in some cases completely invalidate the insurance. Sales staff often
put words in customers’ mouths and then rushed on hoping the customer wouldn’t notice that they’d agreed to include data
on their policy that wasn’t true – such as the age they began driving. Likewise Staff members would rush over excess
information or say things like “two five hundred” emphasising the “five hundred” so that the customer thought their
excess was $500, not $2,500. By putting the excess up they lowered the premium considerably, which led to a sale and the
staff member getting a notch closer to his or her bonus target.
“One victim of this maniping, Amanda Easterbrook found that the Australian-based staff member who sold to her had
entered into the policy that her car was garaged at home, even though she had no garage. Had her car been stolen, Youi
could have declined the claim and voided the policy from inception with no premium refund because Easterbrook would have
been paying lower premiums based on an untruth. Fortunately Easterbrook was aware of the significance of the incorrect
details entered by a staff member on her policy.
“Staff members also confused the customer into saying things that weren’t true, but would reduce the premium. A common
one was that their car was parked on the property or in the garage rather than on the road. This reduced the premium to
a point where the customer might buy the policy, but it could void their cover if not true because insurance is based on
a contract of “utmost good faith”. Insurers can decline claims on any aspect of the policy if utmost good faith has been
breached, not just breaches related to that exact claim.
“In one call I listened to I heard the sales adviser prompt the customer to agree with her on the statement: ‘When you
use it to get to work I have got here it is parked outside on the property, yeah?’. The customer who could be heard to
be distracted by children in the background replied: ‘yeah’, whereas she meant parked on the property at home, which
they had just been talking about at length, not work. Sales advisers knew to move onto the next question quickly before
the customer had time to think about what they had just said. Often customers were bamboozled into agreeing to all sorts
of things that would invalidate their cover.
“Astoundingly I heard Youi salespeople in calls I listened to attempting to get customers to reduce the sum insured on
their homes – in one case by more than $400,000. A reduced sum insured made the premium appear cheap against their old
insurer. There was more than one such ruse used in the calls I listened to. The idea that staff members at an insurance
company were encouraging home owners to drop their cover by hundreds of thousands of dollars is just mind boggling.
“One of the most shocking aspect of the mis-selling that I uncovered was that New Zealand, Australian and South
African-based staff members selling to Kiwi customers routinely attempted to take and use payment details from clients
who had quite clearly just requested a quote. Staff members referred to requests for quotes as the ‘Q word’. The ones
that spoke to me said their managers implored them to get payment details from customers looking for a quote and to
start the policy whether or not the customer wanted it.
“A number of ruses were used to get credit card and bank account details for direct debits. Some customers were told as
I was that the system couldn’t produce a quote without these details being entered or that they could only ‘unlock’
discounts into the system if payment details were entered but that no payments would be taken out. Sometimes they told
the customer that they could set up a policy in readiness for the customer, but started it anyway. Or they said that
they could cancel the policy if the customer didn’t want it. Many customers found, however, that no matter what they
were told the policy was started and their accounts debited instantly.
“When customer realised and tried to cancel the policy they went into what staff members call the “retention merry go
round”. To “cancel” policies they’d never requested they had to deal with staff members who were paid commission on how
many customers they retained. As a result many found it almost impossible to cancel and some, especially elderly
customers, gave up. Kate Hodgins’ elderly father was charged $2,000 in two separate withdrawals a year apart but fell
victim of the retentions merry-go-round and couldn’t cancel the policy or get a refund. Staff members told me that
retentions staff would often hang up on people who wanted to cancel. What’s more, email cancellations were simply
ignored as mine was. Youi’s management claimed in each case that I looked into that the emails were never received.
“Youi has repeated many times since my first investigation that they are working with affected customers. I have
recorded hundreds of complaints about the company. In my experience only those customers who kick up a huge stink on
social media have had their cases dealt with. Others who don’t have the wherewithal to fight have lost their money.
“Youi’s management has claimed repeatedly that the sales methods used in its New Zealand, Australian, and South African
call centres was not condoned by management. But staff members say that the culture came from their direct managers who
earned incentives from the number of policies sold and/or retained by front line call centre staff. ”
Clement says that in her 30 years as a journalist, 20 of those writing about financial services, the Youi prosecution is
the worst case of mis-selling to consumers she has ever encountered.
“In my 30 years as a journalist I have to say hand on heart that I have never come across a company whose sales methods
were so inappropriate for the product that they are selling. Since I started my investigation in March 2015 I have
listened to many many sales calls and haven’t yet heard one that didn’t include at least one instance of mis-selling. In
court it was heard that individual complainants had fallen victim to as many as seven different types of mis-selling in
their sales calls. In those calls customers were groomed for sometimes more than an hour to hand over payment details
when they had asked for a quote. All of the calls I’ve listened to employed multiple hard-sell tactics, which I believe
are inappropriate in New Zealand. Kiwis expect to be treated fairly and as a result often did not comprehend how they
were being manipulated during the commission sales and retention calls. Kiwis are “far too trusting” making them an easy
target, for unconscionable sales methods.
“The difficulty for staff, as customer complaints confirm was that by and large Youi’s prices were more expensive than
competitors, which made the policies too difficult to sell by standard methods. Managers would sometimes stand over them
telling them what to do to clinch the sale at all costs.
“Yet mis-sold home, car or contents insurance can quite literally bankrupt people. If their home burns down, contents
are destroyed or car stolen, written off or they damage third party property and their insurance doesn’t pay out, most
Kiwis wouldn’t have the financial resources to cope.”
Clement says customers who have been mis-sold to or never received refunds for money taken from their accounts
unlawfully should complain publicly on Youi’s Facebook page and Twitter feeds, no matter how many years have passed
since the incident happened. “They can also complain to the Insurance Ombudsman. However I have noticed that customers
who complain publicly on social media get their refunds or claims paid out quickly before they make more fuss.
“Customers should also demand to hear their sales calls. Hearing the verbal calls often uncovers some of the sleights of
hand used that aren’t evident if Youi sends a transcript. I have come across many occasions where Youi has told
customers that they will have to pay to hear their own sales calls. However given the widespread mis-selling and the
guilty plea I believe customers should push to be given the recorded calls. It’s ironic that claims staff members have
the calls available at the touch of a button to listen to, but customers are told that it would cost a lot of money to
retrieve them. Those calls are one of Youi’s many dirty little secrets that it doesn’t want getting out.”
Following her New Zealand investigation, Clement tipped off and then assisted Melbourne Age reporter Liam Mannix in
carrying out a similar investigation into the same practices across the ditch. That very in depth and well-researched
article led to an investigation by the Australian Securities and Investments Commission (ASIC) which is still ongoing.
Clement says: “Whilst investigating the New Zealand mis-selling I came across many many more Australian victims of the
same practices. In fact I believe the scale of the problem was worse in Australia than New Zealand. The three call
centres in Australia, New Zealand and South Africa sell across borders and used the same methods whether selling to
their local markets or overseas.”
Clement says the issues related to buying insurance from Youi didn’t just relate to the mis-selling. “Customers are not
made aware as well that the Youi house and contents policies are substandard. The house policy is probably the most
shocking. Kiwis who phone up for a quote assume that they are comparing apples with apples. But the Youi policy covers
specific perils such as fire and earthquake, not “all risks”. Other New Zealand insurance companies moved to the more
comprehensive ‘all risks’ cover in the 1980s after it was shown that specified perils cover did not adequately protect
home owners from all of the risks to their home. The vast majority of consumers wouldn’t realise that they were buying a
substandard policy.
“Youi talks about ‘tailor made’ insurance. What this means in reality is that the standard benefits offered by other
insurers such as accidental damage, and mobile phone and jewellery cover away from home aren’t included in the policy.
Because staff members were driven by commission they were incentivised not to let consumers know that this basic cover
wasn’t included.
“Not a single call I have heard that involved the selling of a house (buildings) policy was the customer made aware that
they weren’t covered for accidental damage and that the policy wasn’t an “all risks” cover, which is standard in New
Zealand. In fact the advisers often used the shortcomings of the policies as a sales method.
“One such case was police officer Josh Parsons who believed he was ‘a little bit more savvy than most’ until he found
that he had been taken for a ride by Youi and not offered accidental damage cover. Like most Kiwis he assumed this was
in the policy as standard.
“Parsons took out a contents insurance policy with Youi, but he says the sales adviser failed to point out that there
was an accidental damage “extension” that he could have paid extra for.
“His flatmate accidentally sat on his TV (which was temporarily on the sofa) on the day they moved in, breaking it. When
he phoned Youi to make a claim he was told he didn’t have accidental damage cover and should have read his policy.
“What really annoyed Parsons was that he sales person had told him that Youi’s policy was better than the one he had
with State Insurance, whereas the opposite was true.
“In the same call Parsons found out that he had not been given cover on his mobile phone, although fortunately he hadn’t
needed to claim. ‘This is 2016 please’, he told the claims agent. ‘My phone is not covered? The answer (from Youi) was:
‘some people don’t have mobile phones so we don’t cover them (automatically)’. He added that he believed Youi had
deliberately withheld information about accidental damage and mobile phone cover from him to sell the policy.
“Parsons complained repeatedly to Youi, but got nowhere. One thing that surprised Parsons was that he kept being put
onto ‘super friendly’ staff members who said they would help, but went away and nothing happened. ‘This guy made me feel
really good. He said: ‘oh my, this is really bad, we are going to get this sorted for you’.’ Parsons was then told again
that he was not covered. ‘It felt like the good guy, bad guy situation,’ he says.
“The friendly technique was taught to Youi staff during basic training and described by one former staff member as
‘person to person manipulation’. ‘You get them to trust you that you are going to do them a favour and think I will give
them a good deal,’ she said.
“One former staff member who sat at the other end of sales calls of the type described by Parsons said she felt deeply
uncomfortable that accidental damage; mobile phone; and jewellery were not covered and that she was encouraged not to
inform customers of that. ‘ ‘My managers explained that in Australia no one needs that. I have lived in Australia myself
so I knew that was pure bullock,’ she says.
“Another said: ‘We were told not to mention that possibility of that being available. If we added accidental damage it
added to the price. I brought this up with my manager. I said: ‘75 per cent of contents claims are accidental damage.
Clients must be ringing up to make claims. The manager tried to push it to the side.’ His manager told the staff member
that this wasn’t happening.
As well as failing to offer accidental damage on house and contents policies I have also heard calls and heard from
former employees that unless customers specifically asked for agreed value policies on their motor vehicles, they were
not told about them or that they were automatically given market value policies.
Background
Youi is an insurance company that offers home, contents and vehicle insurance products. It was incorporated in New
Zealand on 6 June 2013 and began to operate in the New Zealand market on 28 July 2014. Youi is a wholly owned subsidiary
of Youi Holdings Pty Ltd, which in turn is a subsidiary of OUTsurance International Holdings Pty Limited – part of the
Rand Merchant Insurance Holdings Group, a large international insurance provider registered in South Africa. Youi has
sister insurance companies registered and operating in Australia and South Africa.