Pretoria, Gauteng -- (SBWIRE) -- 11/12/2012 -- By Sean Hanlon, executive director of sales and distribution at BrightRock
One of the things I find most concerning when speaking to people outside our industry about their life insurance is their cheerful belief that some cover is better than no cover. This is purely anecdotal evidence from my own conversations with people – but it may also be one of the reasons why the often-cited 2010 insurance gap study by Asisa and True South Actuaries shows such massive underinsurance among the currently insured market.
I accept that many people can only afford some cover. At the ages people typically take out insurance for the first time, their earnings are usually tied up in paying off debts and raising families. But financial circumstances change, and – critically – so should the cover people buy. Even when cover is adequate at the outset, it may lose relevance over time as a policyholder’s situation and needs change. The discipline of regularly reviewing cover can make the difference between cover that’s relevant and provides the best financial protection a client can afford, and relegation of that cover to the client’s bottom drawer – never to be thought of again.
But what are the barriers to long-term relevance? Some that stand out for me – and in no particular order – include:
- Psychological barriers on the client’s part. People don’t like to think about the possibility of sickness and death, and therefore don’t necessarily want to engage with their insurance cover or their financial adviser more regularly. Clients may also feel intimidated because of the perceived complexity of life insurance and their own lack of knowledge;
- Practical barriers on the adviser’s part. Financial advisers don’t always know when major changes have occurred in a client’s life that might require an adjustment to cover. While most financial advisers do check in with their clients at least annually, these touch points might not coincide with those critical points of inflection in a client’s life, potentially leaving clients exposed for up to a year;
- Administrative and underwriting barriers on the insurer’s part. Life insurers too have little way of knowing when a client’s circumstances have changed. Furthermore, the way products have been priced and structured traditionally has also limited the insurers’ ability to offer flexibility over time.
For example, while clients may update their cover over time, they may have paid from their first premium for components of their cover that will later fall away. They may, for instance, take out extra life cover to secure a debt that will later be paid off, which will therefore later reduce their need for life cover. In many instances, both the client and the adviser can predict exactly at what point the extra cover may become irrelevant. However, most product structures can’t make provision for this cover to fall away automatically when it’s no longer needed, so the cover is priced for life – a wasteful and inefficient way of paying for the cover. Should the client fail to update their cover at the point of paying off the debt, they’ll continue paying for years to come for cover that’s no longer relevant to their circumstances and needs.
These barriers are real, but not insurmountable. At BrightRock, we’ve paid special attention to relevance of cover in our product philosophy. So we’ve built our cover around specific financial needs and built in the flexibility that allows clients’ cover to ebb and flow over the years based on the predicted behaviour of those needs. We’ve also created the ability within our policies to buy up more cover or redirect unused cover to areas of more pressing need with less onerous underwriting requirements or with no underwriting at all, so clients don’t lose the value of the premiums they’ve paid from the start.
That’s on the product development front but we’re confident even more can be done through communication and a relevance-oriented servicing strategy.
Cover that stays in touch with a client’s changing needs presupposes knowledge of the client’s needs – and that can only be achieved by relationships. Our servicing philosophy focuses on supporting regular conversations between all these roleplayers around the client’s changing needs. We want to educate consumers about what financial needs they need to consider, when they should let us or their advisers know about their changing needs, and about the potential impact of their needs changing on the relevance of their financial protection.
As a new entrant to the market, we’ve not yet reached the point where our policyholders are needing regular reviews of their cover, but I hope to be able to report back in future on how effectively the tools and structures we’re developing are able to support the process.
At the heart of the matter, our belief is that the difference between relevance and relegation of client’s cover is a working relationship between all the parties concerned and that’s something we believe financial advisers and product providers alike can easily work on.
BrightRock was started with the goal of creating insurance products that truly meets consumers’ and financial advisers’ needs. It offers truly individualised life insurance cover that’s built around your specific needs at the outset, and is specially designed to change with you as your needs change. And because BrightRock’s cover is flexible and changes appropriately when your needs change, it’s more efficient. This means both your cover and your premiums remain relevant, and more affordable, throughout your life. BrightRock (Pty) Ltd is an authorised financial services provider, underwritten by Lombard Life Ltd. For more information please visit us at, www.brightrock.co.za.