Beware the 'no-response' catch that can make you pay

It’s illegal for companies to make an offer to their existing clients — one they call a “value add” but which comes at an extra cost, of course — and then regard their lack of response as a yes.

The Consumer Protection Act term for that is “negative option marketing” and the reasoning is that a lot of people miss e-mails and SMSs, so it’s unfair to consider a lack of response as consent. But still, it happens.

Fidelity ADT sent its Gauteng clients an SMS which read: “Dear valued customer, from 1 August 2023 Fidelity ADT will be adding a monthly SecureFire fee of R35 per month to assist you in the event of a fire. Should you wish to opt out, please send an e-mail to ...”

When I asked the company how it justified that, I was told: “Our legal team has confirmed that the correct steps were taken in accordance to the applicable law. The customer was given the option to opt out as required by law.”

By law, a company can’t automatically, by default, impose that extra cost on clients who fail to respond, and the office of the Consumer Goods and Services Ombud agrees in this case.

But the security company had no appetite for further engagement on the matter.

Responding to the rapidly escalating incidence of theft and hijacking of cars in Gauteng, South Africa’s largest short-term insurer, Santam, took an executive decision last year on the part of clients it felt were at highest risk.

Get a tracking device into your car by mid-December, it told affected clients in an e-mail, and tell us about it. We will then lower your premium. If you don’t, Santam told them, theft and hijacking cover will be removed from your policy and your premium lowered accordingly.

Michael Pereira was among those “within the geographical area that is considered high risk” who were sent that e-mail last September. If he chose a specific tracking provider for his Toyota Etios, his premium would be discounted by R54 a month, he was told. If he failed to comply, the theft and hijacking cover would be removed and his premium would drop by R72.

Pereira says he didn’t see that e-mail, nor the updated schedule he was sent after the December 15 cut-off, advising that his car was no longer covered for theft and hijacking.

Eight months later his parked car was stolen at midday from a Coronationville street and Santam rejected the claim on the grounds that it wasn’t covered for theft.

“Santam imposed the amendment, not me,” he told me. “That has resulted in a loss of R116,000 and my daily transport, which has had a huge impact on me and my family and is impacting on my work.”

As he took out the policy over the phone, Pereira argued, Santam should have called him to make sure he knew about the new requirement and the consequences of him not complying.

I put it to the insurer that a follow-up phone call to those who had not responded to that call-to-action e-mail of September, to ensure that they knew of the new requirement and what their intentions were, would have been appropriate.

After all, financial service providers invest in such call campaigns when they are selling products, and should surely do the same when affected policyholders stand to lose so much with a very material change to their cover.

I asked how many clients were sent that e-mail of September 2022 and how many clients’ theft and hijacking cover had fallen away from December 16 as a result of their failure to respond.

Also, how many of those, like Pereira, have had their theft or hijacking claims rejected since then as a result?

Responding, Santam said its policy contracts state that they may make changes to a policy by providing the policyholder with a 31-day written notice of the changes, which complies with the Short-Term Insurance Act’s Policyholder Protection Rules.

“E-mails sent to clients serve as this written notice — we do not have to make telephonic contact to discuss or implement such changes,” Santam said. “We regret any inconveniences that [the policy amendments] may have caused our policyholders, but they were timeously communicated to our clients.”

Pushed to supply the numbers I’d requested, Santam would say only that: “This tracking system installation project impacted less than 5% of all vehicles currently on cover with Santam.

“The implementation of this project was well received by most of our clients who had the required devices installed within the allowed timeframe. We have not seen any significant cancellations of policies, as a result.”

Tracking company Netstar attracted some heat on social media this week with its e-mail and SMS campaign to its Gauteng clients.

“From November 1, 2023, Netstar is further enhancing your safety and visibility for just R12 extra per month. For opt-out instructions ...”

“What rubbish is this where you add R12 per month to my account for an unsolicited service and then I have to opt out?” asked one on X. “Surely for extra cost it should be an opt-in model?”

Responding, Netstar’s CEO Jeandre Koen said that in a bid to curb the uptick in theft and hijacking “intensity”, the company had partnered with Vumacam, as that company's “cutting-edge” camera technology enabled it to enhance its vehicle recovery capabilities. A commendable move, for sure, I said, but it didn’t justify a negative option marketing campaign.

I’m happy to report that on Friday Netstar began calling all non-responsive customers to find out if they wanted to be part of the initiative — that is, to pay an extra R12 a month for it — or not.

“Despite the e-mail/SMS that was sent out to some of our customers,” Koen said, “no customer will be debited unless they have expressly opted in for the service.”

Good to know.