The dynamics of policyholder needs

Policyholder needs are changing more rapidly than ever before. Brokers and insurers in the short-term industry must begin to recognise the many changes that affect their clients and design solutions to meet their changing requirements.

The days when short-term insurance was just short-term insurance and one size really did fit all, are long gone. In this rapidly changing world, clients are facing new challenges and new opportunities, and expectations that their insurance should meet their new needs are not unreasonable.

The imperative behind short-term insurers and brokers moving with the times is a financial one: because insurance is already a grudge purchase, when the going gets tough and budgets shrink, short-term insurance is one of the easiest expenses for consumers to cull.

Slow to react

Many of the changes taking place in the world and in the country affect clients' short-term insurance, yet there is seldom any positive reaction from the short-term industry to advise clients of the impact of these changes, nevermind creating innovative new products or features to provide solutions.

Recognised business imperative

In a 2006 survey by PricewaterhouseCoopers the rise of consumerism and the fact that clients are becoming more sophisticated, was identified as a major issue. Participants in the survey also recognised that one of the key needs going forward was increased transparency, while the need for more choice, greater flexibility and greater protection was also mentioned prominently.

One company noted, very accurately, that insurance is about selling expectations and that fulfilling these expectations was the problem. The clients' expectations are that they will be covered in the event of a claim.

In the past, if you had a valid claim, your insurance would pay out. Today everything is shrouded in mystery, endless ifs and buts, and extensive uncertainty. Phrases such as "each case will be treated on its own merits" and "cover will depend on the specific circumstances" do not foster certainty and peace of mind – instead they validate the belief that short-term insurance is 'just not worth it'.

The Eskom effect

The Eskom issue must be a prime case in point. Pages have been written to explain exactly what is not covered in terms of Eskom load shedding and exactly when power surges resulting from the load shedding will not be covered.

So much uncertainty has been created regarding the functionality of the alarm back-up battery and whether or not a client will be covered if a burglary occurs during a power outage. None of it is intelligible to the ordinary consumer, who has neither the time nor the inclination to understand the nuances of the relevant clauses and probably has no idea where their alarm battery back-up is anyway.

Under the current circumstances, the alarm warranty on most policies is impractical and dangerous, exposing clients to the risk of a repudiated claim.

Yet insurers have not come up with a solution for their clients, whether personal or commercial, despite the fact that we have been forewarned that load shedding will be a feature of the South African lifestyle for a considerable time to come.

Insurers have not advised clients that in light of the current situation, the alarm warranty would be relaxed or amended. Insurers have not created an option where a smaller discount would apply but the risk of the battery failing would be covered, or even created an additional excess to cover this eventuality.

In a previous article, it was suggested that clients sacrifice their armed response alarm discount on their policies and rather pay the higher premium to ensure they have cover, should the back-up battery fail. This suggestion arises squarely out of the recognition that since the insurers will not do anything about the problem, policyholders had better take action to protect themselves.

All the consumer is left with is a vague feeling that they are being taken for a ride. Any peace of mind that they will be covered in the event of a claim has been eroded, and when decisions must be made about cutting monthly expenses, short-term insurance is an easy chop.

Motor side

Here's another example. The petrol price could reach R10 a litre this year, placing consumers under exceptional financial pressure. With the exception of Hollard's Pay-AsYou-Drive policy, insurers have not come up with innovative new ways of insuring vehicles to make it more cost-effective for cash-strapped consumers. Insurers could consider a motor (sedan) vehicle extension for consumers utilising their vehicles as "pool cars" which would offer extended passenger liability cover etc.

Or, consider the fact that South Africa will soon adopt a points system to enforce better driving.

Will policyholders have to declare every demerit to their insurers? How will this affect their insurance? What if the demerit was a result of a once-off offence? Will the insurers simply look at the total amount of demerits or will the difference between demerits for drunken driving as opposed to driving with a defective vehicle be taken into account?

Will an analysis be done to see whether speeding is a regular offence by the policyholder or if this was just a once-off occurrence? If a policyholder does occasionally speed, as we all do, is it better to simply not have insurance, since it probably won't pay out in any case?

What about the information stored on tracking device records? No short-term insurer has yet communicated the implications of having a tracking device that records all the movements, including time, place and speed, of a vehicle. Do the policyholders know that this information can be used against them at the time of a claim?

That's just the way it is

Unfortunately, at the moment, it seems that the short-term industry is set in its ways, telling consumers that this is what the cover has always offered, and those are the premiums, and there is not much else that can be done.

No wonder, then, that few consumers hesitate to cancel their insurance at the first sign of budget constraints.

It is essential that insurers and brokers start to think outside the box in terms of new and innovative cover options that could prove to policyholders that their insurance does cover them despite the many changes taking place, and in fact adds value to their lives by responding to the changes and offering solutions.