Turning personal accident into opportunity
Brokers who are keen to add value to their commercial and individual clients will do well to consider including personal accident cover in their product suite. David Honeyman, Business Head: Accident & Health at SHA Specialist Underwriters reckons there are opportunities to improve personal accident and group personal accident penetration by working through intermediated distribution channels, and fine-tuning solutions for industries.
Client, broker and underwriter working together
Honeyman told attendees at the recent Insure Talk 40 webinar that insurers and underwriting management agencies (UMAs) should work closely with their broker partners, and brokers’ clients, to explore where personal accident cover can add value. He said that during interactions with SHA’s brokers, many conceded that their clients did not have personal accident cover in place. He then singled out this insurance ‘gap’ as an excellent starting point for future ‘sales’ discussions.
Brokers should not push into the personal accident space without strong product knowledge. First and foremost, they need to be able to explain the difference between a personal accident policy and the various risk benefits that their client’s employees might enjoy under existing retirement-linked group risk schemes. Personal accident is not a replacement for retirement fund benefits nor is it a stand-in for your client’s medical scheme or the country’s statutory Compensation for Occupational Injuries and Diseases (COID) arrangement.
An individual personal accident policy can offer cover for accidental death; permanent total disability; permanent partial disability; temporary total disability; emergency expenses shortfalls following an injury; and emergency medical treatments, among others. In SHA’s experience, most claims against these policies arise from death or injury due to motor vehicle accident; assault or murder; recreational sports injuries; and injuries on duty or at home. The value of personal accident cover therefore becomes evident when you unpack South Africa’s crime, road accident and occupational injury statistics.
SA’s crime, road accident stats leave one’s blood cold
According to Honeyman, there are over 25 000 murders and 12 500 road accident deaths in our country each year, alongside approximately 220 000 registered occupational injury and diseases claims. There are also hundreds of sports-related industries at schools, daily. “These statistics give you an idea of the number of people that are injured annually [and set the scene for a discussion on] how we can use personal accident benefits to add value via different distribution channels,” he said. Some case studies offered useful insights.
The first case mentioned during the presentation centred on the transportation sector, with SHA reportedly working with “quite a few transportation operators who have to buy passenger liability cover”. These firms complained that although the passengers they transported had cover under the Road Accident Fund (RAF) it was taking far too long for such claims to settle. These operators were concerned about the moral and reputational risks to their businesses for failing to look after people who were injured in road accidents. The solution was to include an element of death cover in the passenger liability policy to facilitate the payment of immediate compensation to affected passengers’ families.
The second case study centred on schools which have proven notoriously lackadaisical insofar their accident liability exposures. “It is amazing how many of the schools [we interact with] had not even asked the basic questions about local medical facilities and the process [and costs] for admitting injured students or visitors,” Honeyman said. He noted that brokers could offer a solution that provided emergency transportation; hospital admission; and death, disability and emergency expense pay-outs following personal injury at the school; this cover can be extended to cover sports injuries, though this can become quite costly.
Sensible coverage for young families
Turning to individuals, Honeyman said that young families could benefit from an element of personal accident cover to support their group risk and individual life policies. He noted that younger people have greater financial responsibilities and are statistically more susceptible to accident-related death events than those nearing retirement. The cover is affordable too; using a tried-and-tested ‘back of the matchbox’ calculation, he suggested that each R1 million in personal accidental death cover costs as little as R75,00 per month.
The argument for including a component of accidental disability cover is equally compelling. According to Honeyman, you must look carefully at your clients’ group risk and individual life policy benefits to determine what constitutes a disability event and whether the pay-out following such events will be adequate to meet their financial needs. Injuries that are not considered serious enough to trigger disability and income protection pay-outs on traditional life policies could potentially be ‘on cover’ in a personal accident product.
“As much as we would like to believe that every employer in South Africa sees value in a retirement fund and bundling death, disability and funeral covers for their employees, a lot of them do not,” Honeyman said. This is particularly true for small, medium and micro-enterprises (SMME) where few provide any benefits to their employees. “There is an opportunity to work with these SMMEs and show them the value that a group personal accident policy offers,” he said. This type of cover gives peace of mind to employers that their employees will receive some financial assistance following an accident event.
Business continuity and immediacy of pay-out
There are two further aspects that brokers can explore when interacting with SMME clients about group personal accident cover. The first is to consider the costs associated with one of their employees becoming injured and being unable to return to work for a period of time. And the second, is to champion the immediacy of pay-outs on the personal accident cover versus pay-outs from COID and RAF. “COID and RAF claims take time before they are paid; your client’s employees need to be compensated immediately,” Honeyman said.
Brokers can also add value by assisting their clients in understanding COID. “Whether your commercial clients have casual labourers, full-time workers or part-time workers, they have to register with COID,” Honeyman said. “[Failure to do so] is a criminal offence which will result in jail time or fines or penalties”. Despite this, around half of the companies in South Africa remain non-compliant. He suggested that brokers incorporate wrap-around insurance solutions that work alongside COID as well as looking at other ways to assist clients with COID Act compliance, such as registration, annual payroll confirmation and notification of COID claims.
Opening cross-selling ‘doorways’
Insurers and UMAs can also assist with education and training on personal accident and group personal accident cover and the COID Act. The accident and health or personal accident space opens cross-selling ‘doorways’ between commercial and individual clients. “If you have a commercial client base, you can send an opportunity to each employee to buy individual cover for themselves, their children, their domestic worker, or whoever; cross-selling between those client bases offers huge potential,” Honeyman concluded.
Writer’s thoughts:
The shocking crime and motor vehicle accident statistics shared during the SHA presentation suggest that group personal accident and personal accident cover are a no-brainer. Do you agree? And does your brokerage offer this product? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].
