SA’s shocking accident stats highlight need for accident cover
18 October 2013
Petrie Marx, Sanlam
With an average 11 000 road accidents every year on our roads causing death, disability and serious injury – and leaving countless families without breadwinners – it is critical that South Africans are financially prepared for this significant risk we all face. In terms of ensuring clients are well covered for accidents, there are two options: full risk cover, which includes accidents as one of the many risks covered, and stand-alone accident cover.
Petrie Marx, product development actuary at Sanlam Personal Finance, says stats released by Transport Minister Dipuo Peters on 18 September showed that road accidents result in an estimated R306 billion loss to South Africa’s economy every year. "Not only does this have a huge impact on the country as a whole, but it also seriously affects the lives and livelihoods of the individuals concerned.”
The stats make offering clients adequate risk cover in the event of an accident essential. "Understanding how accidents are provided for in risk cover is extremely important. For instance, advisors should note that accidents are covered by a standard basket of risk products. So any individual with comprehensive life, disability and life impairment policies will be covered for death, injury or disability caused by an accident.”
"But for those who, for one reason or another, are not able to take out full risk cover, stand-alone accident cover is a good option. Accident cover fits broadly into the three main types of risk so it is sold as accidental death cover, accidental injury cover and accidental disability cover,” says Marx
He says there are four main reasons that accident cover is sold in isolation of a fuller risk cover offering:
1. The client has been declined for full life or disability cover:
When a client is declined for life or disability cover for reasons such as ill health, accident cover can be an effective way to ensure that they do still have some risk cover available in the event of an accident.
2. The client is unable to afford premiums for full life or disability cover:
Once a needs assessment has been completed there is the issue of cost, and often the decision to opt for accident cover is based on a limited budget.
3. A desire to avoid the underwriting process:
Some individuals do not wish to undergo the underwriting process, for whatever reason (fear of needles ranks quite highly). Accident cover does not require a medical examination, so is an option for these clients.
4. A belief that they don’t need cover for disease:
Young, healthy people do at times prefer to leave taking out fuller cover packages, which include dread disease, until later in life. Considering that accidents rates are high among the youth, ensuring adequate cover for this risk through accident cover is a good option.
Marx says that accident cover – whether as a stand-alone policy or as part of an overall risk basket – is aimed at ensuring that an individual’s financial needs, and those of their families, are taken care of when they are no longer able to work, either on a permanent or temporary basis.
Accidental injury benefits offer cost effective cover for certain serious injuries of a temporary nature which require long recovery periods. "In South Africa there is a particular lack of adequate provision for temporary loss of income because many people believe they can ‘make a plan’ by borrowing from families or employers. But the fact is that this loss of income can be huge and can be extremely hard to recover from, sometimes impossible.”
He concluded that, as with dread disease, the definitions linked to accident cover should be well understood by financial advisers and diligently explained to clients. "Insurers have well defined definitions attached to claims for disability or injury through accidents. The definitions favour those injuries which cause the greatest loss of income or which occur most often in an accident.”
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