FANews
FANews
RELATED CATEGORIES

SAIA: Consumers urged not to cut short-term insurance in turbulent times

11 May 2016 Viviene Pearson, SAIA
Viviene Pearson, CEO of SAIA.

Viviene Pearson, CEO of SAIA.

South Africans are currently experiencing turbulent times economically. The increasing costs of food, electricity and fuel along with rising interest rates are resulting in consumers allocating more than ever to debt repayment. Recent reports show that South Africans are spending as much as 49% of their after-tax income on debt repayment, mainly to service personal loans and store accounts.

Viviene Pearson, CEO of the South African Insurance Association (SAIA), says that according to the World Bank, South Africans are the biggest borrowers in the world, with 86% of the population in debt. “Increasing debt repayment costs mean that consumers have little to no funding for other necessities and financial emergencies.

“Household expenditures are continually being scrutinised in order to make ends meet. One of the areas most affected by consumer cut-backs is what we refer to as ‘risk’ expenditure and includes medical aid contributions and short-term insurance premiums,” says Pearson.

Justus Van Pletzen, CEO of the Financial Intermediaries Association of Southern Africa (FIA) explains that short-term insurance is often the first expense cut, as its benefits are not always visible to consumers. “Damage or loss doesn’t occur frequently so consumers often overlook the critical role that insurance plays in ensuring their financial security.”

The importance of short-term insurance is forgotten when costs are analysed and consumers often opt to reduce their monthly insurance premiums, or do away with their insurance policies entirely. The reality is that insurance is as much of a necessity as a monthly bond or car repayment.

Individuals who have never claimed for damage or loss before are especially prone to forego their cover, as they do not realise how devastating the financial consequences following a car accident or burglary can be.

“A household that is spending half of its after-tax income on personal debt repayments will be unable to raise the cash necessary to repair or replace a motor vehicle following an accident, let alone refurbish a house following a fire or flood loss,” says Van Pletzen.

For those who aren’t covered at all, the impact of an unexpected accident will be financially crippling, says Pearson. “Consumers without the necessary cover in place may find themselves in a position where additional debt is needed to replace, repair or otherwise counter an event which would have been claimable under a comprehensive insurance policy.

“This is where the short-term insurance industry provides immense value, as a reliable means of protecting valuable assets against theft or damage, as well as limiting the necessary personal spend in these instances. It’s the ultimate peace of mind in the current financial climate.”

The short-term insurance industry has consistently delivered on its promise over time, explains Van Pletzen. “The Ombudsman for Short Term Insurance annual report confirms that for every 1000 personal lines claims submitted, 997 are settled to the satisfaction of the consumer – of the three unsettled claims two are found by the Ombudsman to have been fairly dealt with.

“The one claim in a thousand that is flagged by the industry as having an unfair outcome for the consumer is then remedied via the complaints resolution process that was put in place for exactly that reason. Even those members who have never claimed can be comforted in the knowledge that thousands of others have, and that their claims have been settled to their satisfaction.”

South Africa can be proud of its well-governed and regulated short term insurance industry, which remains committed in its approach to provide financial wellbeing and peace of mind to its stakeholders. “The FIA and the SAIA will continue to collaborate in order to ensure that the South African short-term insurance remains sustainable and a key player in building and safeguarding the economy,” concludes Van Pletzen.

Quick Polls

QUESTION

How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?

ANSWER

Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now