A personal (life) line

03 November 2014 Schalk Malan, BrightRock

The term personal lines insurance is used to describe a range of short-term insurance products, such as motor and household cover, to meet individual needs. “However, the concept of personal lines can also provide a handy departure point for your clients to think about their long-term risks and the most appropriate cover for them.

One of the big differences between short-term and long-term insurance is the way these industries describe the risks they cover. With life insurance products, the focus still tends to be on the insured event, such as death, disability or dread disease.

The short-term industry has not only succeeded in making it clear to clients what event they are insured against – such as accidents, thefts, fires - but the industry has also illuminated the underlying risk needed.

Often, the starting point for this understanding is an explicit distinction, at the very outset, between personal and business risk lines.

Facilitating the distinction

With traditional life insurance products in the market, clients’ different needs are bundled together and protected through a single, capitalised lump sum amount with a single duration. Yet, the same distinctions can be made in terms of the nature of a financial need and its duration when it comes to a client’s long-term insurance risks, using the short-term industry’s concept of product lines.

This is the distinction that we think can facilitate a better understanding on clients’ part of their life insurance needs.

Below is a breakdown of the key life insurance product lines:

Personal lines – life insurance

• Cover to replace a client’s income and provide for a client’s personal household expenses in the case of illness or injury, and provide cover for costs such as funeral expenses and outstanding debts on the client’s death.
• Cover to replace a client’s income and provide for the family’s household expenses in the case of illness, injury or death.

Specialist personal lines

• Cover for individuals who specifically wish to cover an estate duty liability (those clients with assets of R3,5 million or more) in the case of death
• Cover for individuals who specifically wish to protect a specific debt only (for example, their bond) in the case of illness, injury or death.
• Cover for individuals who specifically wish to protect their access to healthcare in the case of illness, injury or death.
• Cover for individuals who specifically wish to protect their children’s education and other childcare-related expenses in the case of illness, injury or death.

Business lines

• Buy and sell agreements to ensure that co-owners of the business can continue to operate the business with as little disruption as possible in the event of the death of the business owner. It also ensures that the estate of the deceased business owner receives fair value for his or her business interest, as well as the settlement of his credit loan account
• Key man cover to compensate the particular business for financial losses that would arise from the death or extended incapacity of an important member of the business
• Contingent liability cover to protect a company from major debt due to a serious illness, debilitating injury or death of one of the business owners.

Taking a customer centric view

Fortunately, products are starting to emerge in the market that make a clearer distinction, in the vein of short-term personal insurance lines, between clients’ financial risks.

By doing so, insurers are now able to unbundle cover and offer clients the ability to select a different duration or a recurring income pay-out for one need and a lump-sum pay-out for another need, within the same individual life policy. This kind of thinking is, in my view, the way of the future and a personal life line for the life industry in the era of the consumer.




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