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A simple solution to the complex world of life insurance?

01 April 2008 Adri Malan, Momentum

Every South African owns enough long-term risk insurance. Fiction. The insurance market is very competitive and changes frequently. Fact. This, coupled with the high level of complexity of insurance benefits, could make selling insurance solutions very difficult. Fact or fiction?

It was said that insurance solutions are complex because it addresses uncertainty, which is complicated. Granted. However, do we now sit back and play the "victim" or "bearer" of uncertainty? Definitely not. In fact, there is no reason to apologise for this complexity.

Complexity creates certainty

In appropriate benefit design, complexity is an inevitable byproduct of creating certainty and a more objective and robust claim assessment process. Nobody can deny the merits of adding objective functional impairment criteria to disability benefits, for example. What would you rather have - products that are very simple, but result in uncertainty at claim stage, or complex products that objectively define what they are covered for? Although the answer should be obvious, there is always room for improvement.

Complexity offers flexibility

With some life companies, complexity arose as a consequence of feature-bloating. This is not necessarily a good thing, especially if some of the features are not crucial to a client's needs. In other cases, complexity arose as a consequence of offering flexibility. Rather than a one-size-fits-all approach, some companies offer a building-block approach whereby clients only select the benefits they need thus enabling optimal financial planning.

Team effort

As a financial adviser, you have an important role to play in minimising the complexity. It is your role to assess your clients' financial needs, and then guide them through the complex benefit mechanisms and structures to the most appropriate solution - appropriate advice - not neglecting to frequently review their portfolios. That is why the majority of new generation risk insurance products are sold by intermediaries, and not online or telephonically. How do you explain income protection benefits properly over the phone?

In addition, it should be the life insurance companies' goal to take away unnecessary technical jargon and to provide unprecedented simplicity and certainty in insurance product information, and its application at claim stage. Rewriting thick policyholder contracts, filled with legalese, in plain English is also no longer negotiable.

Best advice, always

Fortunately, there is a solution that alleviates some of the complexities financial advisers are faced with. Question: Once a policy is sold, how do you ensure that it remains "best advice"? Answer: With a "living product strategy" that endeavours to keep your clients' policies up to date, every time enhancements relevant to their benefits are made. This ensures that they always have the most up to date version of their selected benefits.

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ANSWER

Coping with new, unfinalised legislation, leading to uncertainty in implementation
Adapting to brand new claim types, requiring the development of digital, member-initiated claims capabilities
Addressing member education and awareness to correct misconceptions and ensure understanding of the system, including tax implications
All of the above
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