Factual errors in weekend article on Zimele misleading
The Life Offices’ Association (LOA) has noted with grave concern a number of serious errors, which were published as part of an article on the new Zimele standards for credit life insurance, life cover and physical impairment cover published in yesterday’s Sunday Times Business Times Money section.
Gerhard Joubert (pictured right), CEO of the Life Offices’ Association, says unfortunately the formula used to calculate the premiums for the various Zimele products was applied incorrectly. The premium examples mentioned in both the article and the table are therefore all incorrect.
“If the formula had been applied correctly, the premium for life cover of R30 000 would have been calculated as R86, instead of the R231 cited in the article. Similarly in the physical impairment example, the premium was stated as R180 instead of R35.”
Joubert points out that until now it has been difficult for those with very low incomes to obtain life cover, credit life cover and physical impairment cover. Zimele represents a set of standards that take into account the lack of financial literacy in the entry-level market and is an attempt to ensure that these consumers are offered products that comply with the industry’s commitment to make available products that offer “fair Charges, easy Access and decent Terms” (CAT).
“To make these products more accessible at the lowest possible rates, these life products are issued with very little underwriting. For example, no medical examinations or blood tests are required. Also, there may be no premium rate differentiation except for age. In other words the same rate will apply to all policyholders of the same age at entry.”
He says the premiums mentioned for existing policies in the Sunday Times article are for policies which are fully underwritten and where policyholders are carefully screened for potential risks.
“Regrettably the basic calculation error the article is horribly misleading and detracts considerably from the very worthwhile attempt the life industry has been making to provide life insurance access to LSM 1-5.”
It is also important to note that the Zimele standards, including the pricing standards, were developed in close consultation with the Financial Sector Charter (FSC) Council, the Financial Services Board (FSB) and National Treasury. The standards were approved by the FSC Council, where community, labour, Government as well as the Association of Black Securities and Investment Professionals (ABSIP) are represented.
“We have also committed to reviewing the pricing standards one year after launch, once we have more experience in a previously uninsured market.”
Joubert says in addition the pricing caps were put in place to provide low income consumers with the assurance that they will be charged a fair premium. This does not mean, however, that insurers cannot offer cover at lower prices.
“For consumers who are typically not able to shop around for competitive quotes, the Zimele stamp of approval guarantees that they will be charged a fair price. This is particularly significant in the credit life insurance market, where the price caps will offer meaningful protection to entry-level consumers, seeing that insurers issuing policies compliant with Zimele product standards will now for the first time have to ensure that the premium charged to the policyholder complies with the Zimele price caps.”
If you have any questions about the Zimele pricing standards or the affordability of Zimele policies, please do not hesitate to contact the LOA for further information or visit http://www.zimele-loa.co.za.
