A fixable flaw in short-term insurance

The single most fixable flaw in the personal short-term insurance industry is that policyholders often adopt a ‘renew’ mentality when it comes to insurance policies instead of a ‘review’ approach.

Insurance policies are renewed annually, often automatically. At the same time, they are subject to an increase. In the case of homeowners’ insurance, for example, insurers frequently recommend a standard annual escalation of 10% on the value of a home, which is then reflected in the policy. But is this appropriate? Have there been any changes to the property during the year that might call for further cover?

Revisiting set structures

To ‘renew’ is to accept that what is in place is in order, and simply adjust values. To ‘review’ is to reassess clients’ needs, revisit their risk appetites, re-evaluate the appropriateness of their insurance solutions and advise them accordingly.

Conducting a full review process of added or adjusted content is beneficial for advisers. When we look at the home insurance market, there are a vast amount of things which have changed. The question that needs to be asked is: are you as a broker on top of the trends to remain one step ahead of the game?

All insurers have to be future-thinking, constantly monitoring global and local trends including customer attitudes and behaviour and adjusting insurance premiums frequently to keep pace. If an insurer has to be future-thinking, a broker has to apply the same principals.

Rolling with the trends

Today solar power is being harnessed for use in individual homes. The opportunities for using solar technology as the basis for renewable energy are expanding.

The newer the home, the newer the wiring, plumbing, and roof. If a homeowner has added solar heating during the year, or other ‘green’ technologies like a generator or solar geyser to their home, are these additions covered? With recent load shedding in South Africa, homeowners are also now purchasing generators, more so than before. Smart cars, tvs and phones continue to reach highs in the South African market, but this is just a start of what is to come in the next few years.

With high unemployment and divorce rates continuing throughout the years, financial circumstances continue to change. Therefore, these are also aspects that need constant revisiting.

Premium growth will be underpinned by continued price increases and improvements in underlying housing market conditions, while investment income will also get a boost from surging financial markets reacting to improving economic fundamentals.

These are just some of the aspects to consider when filling in the gaps during the review process.

Making adjustments

While it is essential to nurture personal relationships with clients, from a time perspective, it may not be easy or realistic to meet with every single client annually to review all of his or her policies.

Technology provides the opportunity to meet these challenges. One idea is to conduct an assessment by creating a checklist that can be sent to clients quickly through simple communication via email.

In this way, you can be sure of any adjustments needing to be made beyond the general annual increases, as well as assess if the current policies in place and the escalated premiums are still right for the client.

The assessment could be just a few questions or as detailed as you choose; as long as clients will be directed to providing pertinent information affecting their policies. By asking appropriate questions, brokers are able to provide the right answers and thus provide the right advice.

Further to making sure you advise your clients on the correct type of cover, the assessment can also help you choose the right product provider for your client’s needs.