Time for us to tackle disability mismatch

Disability risk is growing, but the proactive selling of disability covers is not. That’s the feedback from leading industry player, Liberty Life.

The mismatch offers financial advisers significant potential to grow an important aspect of their business AND creates an opportunity for our industry to spotlight the social value it can add.

“One of the most socially beneficial initiatives any industrial professional could undertake is active, knowledge-led marketing of disability insurance,” says Karin O’Brien, one of Liberty Life’s Business Development Managers for Risk.

During 2007, Liberty Life paid out R53 million in income disability claims and R166 million in capital disability claims.

But Liberty believes the national exposure to disability risk is massively higher than current claim levels indicate.

O’Brien points out: “South Africa is a dangerous place. Violent crime and horrendous road accidents not only result in death, they lead to severe injury and disability.

“This reality has been with us for some time. Unfortunately, the implications rarely sink in because it’s human nature to assume ‘it can’t happen to me’. But it can.

“Financial advisers have a huge market education role to play in driving this message home. They will be doing their clients and society at large a massive favour. At a time when our industry comes in for so much criticism, they will once again demonstrate the positive impact our work can have.”

Consumer complacency is not the only issue. Thorough analysis of disability risk exposure deserves much higher priority across our profession, says O’Brien.

Leading insurers offer a broad range of covers, including capital disability and capital disability ‘plus’ provisions, income disability and top-up and benefits to address overhead expenses likely to be faced by a disabled person.

“Disability cover deserves a complete analysis and solution in its own right, not merely as an add-on to life cover,” says Karin O’Brien.

Top-up opportunities in group schemes are not utilised nearly often enough because disability issues are back of mind rather than top of mind.

O’Brien adds: “The family tragedy of inadequate risk cover will keep on happening until the consumer joins the dots … higher risks on the roads and the high rate of criminal violence mean higher risk of disabling injury, while spiralling medical inflation will continue to add to the financial impact.”

Advisers don’t need to conduct in-depth background research to underline the risks. Key facts are easy to assemble.

For example, experts estimate that one year of disability can wipe out 10 years of savings.

Furthermore, one of the most frequent causes of ‘distressed sales’ of residential property is the need to provide capital to supplement inadequate disability provision or no provision at all.

According to the World Health Organisation, 600 million people worldwide have to cope with disabilities.

A significant proportion of disabilities are caused by injuries resulting from road accidents, falls, burns and acts of violence. The incidence of disabilities relating to road accident injuries, interpersonal violence, war and self-inflicted injuries is expected to rise dramatically by 2020.

Karin O’Brien adds: “South Africans are not unique in their unshakeable belief that ‘it can’t happen to me’. But we face special challenges in view of relatively poor national provision for a social services safety net and our high rates of crime and road accidents.

“This makes it imperative that we do more to raise awareness of these issues. At the same time, we could also be raising our own business volumes in an often neglected area.”