Government and industry statistics point to a very real need in the market for an income protection benefit specifically designed for younger people.
The frightening accident statistics from the RAF’s 2010 Annual Report reveals just how crucial income protection cover is in South Africa.
Sobering statistics to show your clients
- The expected number of people injured on South African roads annually is approximately 275 360.
- The number of individual loss of earnings claims increased from 5 957 in 2009 to 6 782 in 2010.
- Loss of earnings claims against the RAF are capped at a maximum of R160 000 per annum, irrespective of the actual loss.
- The timeframe for the settlement of a RAF claim exceeds three years.
- There are currently 209 186 outstanding claims.
(Source: RAF Annual Report 2010)
This means that if one of your clients were injured or disabled in a car accident, they would have to wait approximately three years to receive any sort of financial compensation from the RAF, and this compensation would be capped at R160 000 per year regardless of their actual income.
Young people at higher risk
But the statistics also point to a more concerning issue: younger people are at a greater risk of falling victim to an accident. Arrive Alive data reveals that younger drivers are four times more likely to be involved in a motor vehicle accident. The RAF data shows that the highest percentage - 40.85% - of road user fatalities occur among drivers between the ages 20-35.
FMI’s experience has shown a similar trend, illustrated in the graph below: younger people are more prone to a disability caused by an accident than people over the age of 35.
Cover is crucial, now
Essentially, with regard to income protection and younger lives, younger people simply have more to lose. Not only are they more prone to accidents and injuries that could leave them disabled for a lifetime, but they also face a much greater loss in terms of future earnings.
An injury at a young age would inhibit a person’s entire future and therefore affect their income earning potential for their lifetime. This should provide ample motivation for young clients to start protecting their future earnings now.
Unique solutions
The identification of this challenge also reveals an opportunity for brokers to offer their younger clients - or the children of their long-standing clients - a unique solution that addresses the particular characteristics of the younger market.
“We recognised a need in the market for a product taking young peoples issues with insurance into account, such as affordability and red tape. “ says Brad Toerien, CEO of FMI, which offers an Accident Only Benefit for those younger than 32 on its Business Person Elect (BPE) product. “The benefit offers accident only cover at 50% of the premium for the first three years, after which it automatically upgrades to full cover and full premium for both accident and illness benefits, the cover matures with the client. Our aim was to develop a product that appeals to this market and requires no medical underwriting to ensure a simple and straightforward process, and that offers simple benefits to make it easier for young people to enter into the insurance market.”