Youi insurance reports $14.8m loss during first year operating in NZ; tracks in line with parent company's expectations despite paying high marketing & sales call centre costs

Youi NZ has reported a $14.8 million loss for the year to June, having spent big bucks on marketing during its first year operating in New Zealand.

The South African general insurer, launched in New Zealand in July last year, has differentiated itself from its competitors by fervently advertising its strategy to ask customers more questions to give them a more tailored premium.

While Youi NZ’s financial results don’t specify how much it has spent on advertising, one of its parent companies, OUTsurance International’s 2015 annual report says, “high marketing budgets and sales call centre costs resulted in significant start-up costs being incurred”.

Youi NZ’s financial results show it made a net income of $28.6m in the past year. This was largely made up by gross premium revenue of $5.0m, and the company receiving a $23.9m ‘management fee from Group companies’.

However it forked out $11.1m for ‘acquisition costs and other underwriting expenses’, which include marketing costs.

It also paid ‘short-term employee benefits’ – salaries and non-monetary benefits – of $21.5m, and rent for its offices of $1.7 million

OUTsurance says, “We are pleased with the performance of the business [Youi NZ] to date which is in line with our expectations. The business leverages the support infrastructure of the Australian business and operates a large call centre in Auckland.

“We believe that the growth opportunities available in the Australasian market present the Group with good growth potential over the medium term.”

OUTsurance also notes, “The Youi Group incurred central funding costs of R31 million [around NZ$3.4m] relating to an intragroup funding arrangement which was primarily established to support the New Zealand expansion.

“The intergroup funding arrangement consists of long-term redeemable preference shares which were issued by Youi Holdings to OUTsurance.”

Youi in July last year told interest.co.nz it was investing "close to $60 million" in capital, and would have 420 New Zealand-based staff by April 2015.

Its chief executive, Daniel Matthee, said Youi saw itself as a challenger brand, and already competed with NZ insurance sector behemoth, Insurance Australia Group, in Australia.

"I think our offering is based around the fact that we ask more questions of our customers, we understand their insurance needs better, how they use and don't use their cars, what features and factors are important around their insurance needs, and then we tailor make policies and a quote that is suited to an individual's needs," he said.

"We plan to communicate that via online marketing campaigns and above the line television campaigns as well as through word of mouth.

"We're committed to this market [and] not for the short-term. We're in this for the long haul. We certainly intend to be here for a very, very long time.

"We fully understand that we're the challenger. There's a much larger player in this market that we are conscious of. But we also think it's a sophisticated player and there won't be irrational behaviour.”

Youi NZ is a wholly owned subsidiary of Youi Holdings. Youi Holdings is a subsidiary of OUTsurance International (owns 93% of Youi NZ), which is South Africa’s largest direct insurer. OUTsurance is part of the Rand Merchant Insurance Holdings Group.

Youi has declined interest.co.nz’s invitation for an interview on how the company’s progressing. 

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4 Comments

I have generally found that there is an inverse relationship between advertising spend and quality/relative value of the product when dealing with insurance company offerings. Case in point - Southern Cross Travel Insurance - massively advertised and yet hugely over-priced compared to better alternatives.

Youi can pump as much money into advertising as they like, their reputation precedes them thanks to the information highway. Some of these online reviews are highly entertaining:

http://www.productreview.com.au/p/youi-car-insurance.html

Good luck on turning around that loss Youi.

They appear to be a scam really don't they? I tried to get a quote. Can't do it online, end up on the phone - first warning sign, considering how easy most of their competitors make that. They ask a million questions, well okay - "to get to know you better", so in theory you get get that cheaper premium you deserve. In my case I really think I should get a lower premium, since I do few miles per year, car is garaged, driver has good history, etc, if that is recognized then I am low risk to the insurance co. Right?

But after all the BS (maybe 20-30 mins?) their quote was substantially higher than current provider State! And the default excess triple at $750! So I don't know who they are actually competitive with!

Then they do this sleazy high pressure sales crap by phone, constantly calling back and hassling.

Trade Me Insurance is very competitive, I will be switching to them. No high pressure sales tactics, simple web form, and you can adjust things like the excess and see the premium quote change as you do it so you can choose what level of risk you actually want to cover and pay for. Very nice.

I had a similar experience. I only drive 5000km per year and I'm tired of subsidising everyone elses insurance. I know in the US a lot of insurance is usage based. YOUI's advert insinuated they'd be giving me a discount since I drive less. That wasn't the case at all. They turned out to be the same price my current insurance and judging by their reputation might not even pay out claims. Their phone sharks will try and sign you up without first getting your consent. Then they'll harass you a few times every week.

If a company is dishonest during the sales process, which is the best experience you'll ever get with an insurance company, then I can't imagine how bad they'll be when you make a claim.

AA have been very easy to deal with so I've stuck with them but I'm only on 3rd party insurance as I don't want to subsidise everyone else and don't have a fancy car.