FSC approves more life insurance protection measures

South Africa’s low income earners will soon be able to access a comprehensive choice of life insurance products that offers fair charges, easy access and decent terms as guaranteed by the Life Offices’ Association (LOA) Zimele stamp of approval.

This follows the sanctioning of the LOA’s new set of Zimele product standards for credit life insurance, life cover and physical impairment cover by the Financial Sector Charter (FSC) Council earlier today.

Gerhard Joubert, CEO of the LOA, says following the successful launch of the Zimele standards for funeral products a year ago, the LOA started developing product standards for other life insurance products with the aim of making them not only affordable, but also appropriate for the low income market.

“The Zimele brand aims to help South Africa’s low income earners, those earning R3 000 a month or less, to easily identify those life insurance products that meet the FSC’s minimum protection requirements.”

Zimele is a Zulu word meaning “to stand on your own two feet”, and as a brand represents life insurance products that are accessible, appropriate, simple, affordable and offer good value for money.

Joubert says life insurers are encouraged to develop unique products for the low income market, but in order to be allowed to use the Zimele brand these products must comply with the minimum product standards.

“The aim is to encourage life insurers to design appropriate yet innovative and competitive products for the low income market.”

Zimele product standards

All life insurance products sold with the Zimele stamp of approval must comply with a general set of standards. In addition each individual product is governed by an additional set of standards.

The following standards, among others, must apply to all Zimele approved products:

• Policies may be issued in English, but policy summaries must be available in the dominant language of each province.
• Product descriptions must be easy to understand.
• No HIV/AIDS exclusions may be applied at claims stage and there may be no reduction in the benefit amount at claims stage.
• There may be no rate differentiation except for age. In other words the same rate will apply to all policyholders of the same age at entry.
• Underwriting is permitted and underwriting questions may be asked, but no medical examinations or blood tests may be requested.
• Where exclusions are applied, standard wording must be used.
• Low income earners must be able to buy a policy, pay the premium, or amend the policy at least once a month within 40 km of their residence or work.
• Low income earners must be given the opportunity to lodge a claim and receive payment of the claim at least every second working day within an 80 km radius of their residence or work.
• A share-call line for relevant information must be available six days a week.

Joubert points out that one of the most significant protection measures offered by all policies carrying the Zimele stamp of approval, except for credit life cover, is the fact that policyholders will be given grace periods should they skip a premium.

If a premium is not paid the policyholder is given one month to pay the premium. However, if the premium is not paid within that month, the cover will cease. On policies older than a year, the grace period will be extended by one month for each year that the policy has been in existence, with a maximum grace period of six months.

In addition, the policyholder must be allowed to reinstate the policy at least once within three months should the policy cease because premiums were not paid. On reinstatement the terms must be the same as for the original policy.

In addition to the existing Zimele approved funeral cover, low income earners will soon also be able to choose from credit life insurance, life cover, and physical impairment cover. Outlined below are some of the key Zimele standards applicable to each product:

Credit Life

Credit life insurance is purchased when debt is incurred to ensure that the loan is covered should the insured person die or become disabled.

• Consumers who take on debt may be sold either stand-alone death benefit cover or death and permanent total physical impairment cover.
• Cover may not exceed the outstanding debt amount.
• Death cover must commence on receipt of the first premium – this means no waiting periods may be applied.
• The maximum monthly premium rates are:
  • Life Cover: R5 plus R3.5 per R1 000 of cover
  • Life and Physical Impairment Cover: R5 plus R4.25 per R1 000 of cover

Life Cover

This type of cover makes provision for a lump sum payment to one or more beneficiaries in the event of the insured person dying.

• Death cover may not be less than R30 000.
• The policy term must be at least five years and the maximum age may not be less than 60.
• No waiting periods may be applied to accidental death cover, which must commence on receipt of the first premium.
• Temporary exclusions may be applied to “natural causes” deaths.
• The following maximum monthly premium rates apply (no additional administration fees or levies may be added):
  • Below age 55

R5 + R2.70 per R1 000 of cover

• From age 55 to below age 65

R5 + R4.5 per R1 000 of cover

• From age 65 to below age 75

R5 + R6.3 per R1 000 of cover

• For age 75 and above

R5 + R12.6 per R1 000 of cover

Physical Impairment Cover

Physical impairment covers all conditions, both as a result of an accident or illness, which make it impossible for the insured person to follow any occupation. In addition it also covers the loss of one hand or one foot or the loss of sight in both eyes.

• The policy term for a physical impairment policy must be at least five years and at least R30 000 of cover must be available.
• The maximum age may not be less than 55 at the inception of the policy.
• No waiting periods may be applied to accidental impairment insurance and cover must commence on receipt of the first premium. Limited exclusion periods are allowed.
• Cover for natural causes may be scaled but must reach 100% after two years.
• Standard physical impairment definitions have been prescribed and must be used.
• The benefit must be paid as a lump sum or in monthly installments for twelve months.
• The following maximum monthly premium rates apply (no additional administration fees or levies may be added):
  • Below age 55

R5 + R1 per R1 000

• From age 55 to below age 65

R5 + R2 per R1 000

• From age 65 to below age 75

R5 + R3 per R1 000

• For age 75 and above

R5 + R6 per R1 000

Joubert says now that the full set of Zimele standards has been approved, life companies can start developing the relevant products.