Insurance switch triggers and the case for caution

07 June 2019 Peter Tshiguvho, CEO of Metropolitan Retail
Peter Tshiguvho, CEO of Metropolitan Retail

Peter Tshiguvho, CEO of Metropolitan Retail

Thinking of changing your insurance? Don’t be too hasty. First consider all the facts.

Just like most other South Africans, you probably want what is best for yourself and your family. Underpinning your dreams is the need for financial security and the knowledge that you can weather any storm.

With this in mind, you have dutifully taken out a life policy, insured your home and car, invested in a retirement annuity or pension plan and signed up for a funeral policy.

And then something major happens that makes you to re-evaluate your entire situation. Enter switch triggers – significant changes in circumstance that alter your financial ballparks – such as marriage, birth, changing jobs, buying a new house or retirement.

Some switch triggers are more low-key – perhaps your policy has reached the end of its term, you are feeling the strain of too many financial commitments, or you are in debt. A reflex action might be to cash in your policies or switch to a cheaper option.

In fact, financial strain is something many South Africans struggle with. An in-house Metropolitan survey shows that many do not have control over their spending, while others find it difficult to stick to their budgets. Fluctuating fuel, electricity and commodities prices don’t make it any easier to budget with certainty.

The reality is, however, if you do not stick to some kind of savings regimen and insure yourself against unexpected events, your dreams could quickly go up in smoke. If this happens, you may not be able to give your children the best education possible, buy a new car or enjoy a relatively stress-free retirement.

So, what do you need to consider before switching policies, cashing them in or deciding not to have them at all? While price if often the main consideration when choosing a particular policy, there are many other factors that should be considered before making a final decision.

Service delivery
According to Bain’s Customer Behaviour and Loyalty in Insurance Report, which surveyed more than 174,000 retail insurance consumers in 18 countries, insurance customers worldwide want insurers to be accessible, accurate, fair, fast, empathetic and reliable – for every customer in every encounter.

If you are considering changing your policy, it is important to first consider how well the insurance company has treated you in the time you have been insured with them. Has the company responded to your queries quickly? Are the employees friendly and helpful each time? Do they listen to you properly? Are your issues resolved to your satisfaction? Was it easy to make a claim or resolve an issue?

Conduct research – will the company you are considering changing to be able to offer the same service? Will it honour your claims? Does it have the necessary financial clout to do so?

A critical trait of insurers who manage to build customer loyalty is their ability to adopt a customer-centric approach in every aspect of the business. Key to this is harnessing the immense amount to data that is available to understand customers in an all-inclusive way and give them what they want.

In this respect, do you feel like your insurer understands you and is offering you products that make sense to you and that are relevant to your particular life-phase?

More than insurance
Today, customers expect more than just insurance from their insurers. Benefits can include 24-hour repair services, roadside assistance, breakdown coverage, remote monitoring, weather alerts, health and wellness checks and more.

In South Africa, where people often feel vulnerable on the roads, especially when travelling at night, 24-hour roadside assistance can make the difference between choosing one insurance policy over another.

The best protection for you and your family
Switching policies to a cheaper option could be a short-term solution with adverse outcomes such as a significantly reduced pay-out for your family in the unfortunate event of your death.

Choosing to cash in a policy to pay off debt could turn a potentially comfortable retirement into the most challenging time of your life. It’s another short-term solution with possible dire consequences.

Getting cheaper auto insurance that doesn’t offer roadside assistance could also mean putting your family at risk.

Ideally, your insurance company should partner with you to help you achieve your financial goals. You should be able to consult a financial advisor who will consider your particular situation and challenges and offer you expertise and advice to help you achieve your financial goals.

Educate yourself
In another survey conducted by Metropolitan, it emerged that many respondents did not understand insurance concepts such as compound interest, rounding, fees, consolidation and annuitisation.

To make informed choices about various insurance products, it is important to understand these concepts. If you have trouble getting your head around some of the concepts, getting an explanation from a registered financial advisor can be invaluable.

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