South African insurer Youi sells its 34,000 New Zealand policies to Tower

Tuesday, 24 September 2019

South African insurer Youi is selling its Kiwi client base to Tower ending its disastrous attempt to crack the New Zealand market.

When Youi launched in 2014, it promised to shake up the house, contents and car insurance market.

But by early 2016 its sales tactics led to a Commerce Commission investigation a fine of $320,000 for misleading customers, and even a $100,000 fine from the Insurance Council of New Zealand, which exists to serve insurers' interests.

Tower will buy Youi's portfolio of 34,000 policies for just $13 million.

Youi NZ sold insurance online and over the phone, but some of its sales practices were misleading.

* Commerce Commission lays 15 charges against insurer Youi**

Tower said the deal, which was subject to Reserve Bank approval, would see it offer Youi policyholders Tower policies when their current policies come to an end.

The deal would lift Tower's premium income by eight per cent, and its chief executive Richard Harding said it would accelerate the company's growth.

'The purchase of Youi's portfolio will assist us to accelerate our growth and we are now firmly positioned as a challenger brand focused on delivering good customer outcomes and value for our shareholders.

'Together with the successful implementation of the IT simplification programme currently underway, this investment will deliver growth, build scale and leverage the investment in IT,' said Harding.

Tower, which plans to raise money from its shareholders to fund the move, hoped to complete the deal by the end of the year.

In 2016, the Commerce Commission found Youi had used misleading sales techniques, making 'false or misleading' claims during telephone sales calls, and issuing 'unsolicited' insurance policies that people had not agreed to.

Scott Worsley of Gary Worsley Motorcycles in Fielding says Youi charged him after he sought a quote for a customer.

The company also pleaded guilty to either demanding or debiting consumer bank or credit card accounts without their permission or knowledge, and sending invoices to consumers in relation to unsolicited insurance policies that did not specify they were under no obligation to pay for the policies.

The commission started investigations into the South African company after independent journalist Diana Clement launched a year-long investigation into the company. She had sought a quote from Youi, and was shocked when Youi issued a policy she had not asked for, and debited her Visa card to pay the premium, without her permission.

Commissioner Anna Rawlings said after Youi pleaded guilty to the charges brought against it, that its investigations found 66 sales calls where complainants alleged they had been misled.

'The penalty handed down to Youi in court today serves as a strong reminder to businesses to ensure that customers clearly understand each step of the quotation and sales process and when, and how, they are committed to any purchase,' she said.

The prosecution took into account mitigating factors like Youi's guilty plea, the company's cooperation with the investigation and remedial efforts made, which have included refunding affected consumers and offering individual apologies.

It accepted that Youi's conduct was not the result of deliberate policy by the company, but it was still responsible for the actions of its salespeople, who were incentivised to sell policies.

Clement was invited by Judge Philip Recordon to give a statement to the court about her experiences with Youi.

She told the judge about chief executive Danie Matthee calling her after she complained about her credit card being charged.

She was told by Matthee that it was a rogue staff member she had dealt with and whose employment had been terminated.