Wealthy South Africans cut insurance premiums as recession bites

The fortunes of South Africa’s wealthiest individuals have tumbled over the last two years, with the net worth of the country’s most wealthy individuals halving in 2008 to R58.5-billion. As a result of the recession, these high net worth individuals (HNWI) have begun looking for ways to streamline their cost base.

According to Clint Harker, Head of Insurance at Pinion Insurance Brokers (Pinion), one area that has been identified as a means of reducing monthly expenses is on their insurance policies, with HNWI becoming increasingly price sensitive in terms of their premiums.

Harker says that while mass market insurance providers often see customers searching for cheaper policies, this is a relatively new trend amongst wealthy clients. “This group has become much more price conscious over the last 12 months.”

He suggests that one way for HNWI to reduce their insurance costs is to review the value of their asset base to ensure they are not paying unnecessarily high premiums.

“People often focus on the dangers of underinsurance, but over-insurance is also an issue. If you are looking to reduce your insurance premiums, then it’s a good idea to review the value of your assets and make sure they’re still appropriate for your needs. An insurer will only pay out for what something is worth, so if your premiums overestimate the value of your assets, it is simply wasted money.”

Harker also advises clients whose policies require them to list all items being covered to consider removing smaller priced items from their policies. “For those who are becoming increasingly price sensitive, the increase in premiums to insure a phone that is worth R3000 is often not worth it.

“Instead, for clients who are looking to reduce their premiums, it may be more cost effective to self-insure smaller items instead of specifying them on a policy.”

He adds that Pinion is one of the few companies to offer insurance policies which automatically cover most items up to a value of around R100 000 or more. “Customers have the peace of mind that they are already covered and don’t need to worry about listing each and every item with us.”

He emphasises that anyone looking to reduce their insurance premiums speak to their broker to discuss the options available to them. “If you want to reduce your insurance premiums, then you need to talk to your broker. They will have established a good working relationship with a number of insurers and can therefore go back and try and work out a better price.”