Consumers down but not out when it comes to insurance - FIA

Levels of indebtedness among South African consumers remains extremely high, limiting the level of insurance that a broker’s clients are able to take out. However, despite this many brokers are seeing their client base opting to keep some insurance in place rather than cancelling coverage entirely.

According to Seamus Casserly, President at the Financial Intermediaries Association of Southern Africa (FIA), only a minority of clients are choosing to cancel policies. However, he says that there is still a good deal of movement among consumers as they search for more competitive premiums.

“We have noticed that there is still a tendency to insure the absolute minimum as a last resort before cancelling, which is very positive news for the insurance industry. This indicates most people still recognise the need to maintain catastrophe protection as a minimum,” says Casserly.

Information recently released by the Credit Regulator revealed that at the end of March 2010, credit bureaus had records for 18.21 million credit-active consumers. Of these, the Credit Regulator said only 54% were classified as in good standing.

Casserly says these statistics highlight the fact that consumers are continuing to struggle to get their finances back on track and may continue to opt for catastrophe cover only.

He says there are some steps that brokers can take to help meet the changing needs of their client base. “In the current environment the key to maintaining a successful business is adaptability. Brokers need to keep abreast with the changing needs of their customers and their levels of affordability in order to be able to recommend the most appropriate product.”

“It is also imperative that brokers ensure that their product offering is sufficiently flexible in order to cater for a range of different customers.”

Casserly says for brokers who have clients that are struggling financially, they should recommend products that limit cover, thereby lowering premiums, but still provide some form of protection for the essentials. “Offering products that cater more for the catastrophe such as a hospital plan rather than a full medical aid is an easy way to help a client cut back on costs whilst keeping them protected.”

“Other options include reviewing all items that have been specified on a policy and limiting them to just the critical items, and reviewing the value of motor vehicle on a policy and limiting the extent of motor cover taken out, especially for older vehicles.”

Casserly says the role of a broker is still very important for consumers, particularly as insurers are increasingly tightening up on the issue of claims. “Settling claims to the benefit of clients is one of the most critical parts of a broker’s job and in the current environment with many insurers is looking to limit payouts it is crucial to have a broker on your side.”