Throughout history, we have seen that insurance is a business based on people. The aim is to protect the future and preserve the value of things that clients care about. To do this, insurance companies need to hire the right talent. So, at the end of the day, it is about people helping people.
Financial advice is invaluable in tough times
Clients have felt the pinch of tough economic times. In addition to the increasing cost of living, there have been a number of extreme weather events that have put financial pressure on consumers.
It is critical for people to understand the value of insurance in these tough times and not cancel their policies in an effort to save money. With stretched funds, if an event occurs, it would be difficult for clients to pay for it out of pocket. That is why having the right insurance cover in place is key.
Financial advisers are an invaluable part of the insurance industry, providing a human touch to help clients get the right cover for their needs.
Clients want financial advice
Insurance clients value intermediary advice. Data from Discovery Insure indicates that as much as 70% of their business is written through financial advisers. This shows that many clients trust their financial adviser for their insurance needs and risk management advice. It also shows that financial advisers play a vital role in the insurance value chain.
Key areas where financial advisers can add value
As a financial adviser, it is your duty to make sure you offer the best advice and service to your clients. You can assist clients in managing their insurance policies in a way that will avoid issues at claim stage, such as reminding them of their duty to take due care and to maintain their property. You can also assist clients by giving them advice on relevant cover options for the risks they face today, as well as how to structure their policy to be affordable.
Managing the policy to avoid claim disputes
While some people may think that disputes at the claim stage are caused by complex issues, the contrary is true. Insurance claims data shows that many claim disputes are caused by common things that can be avoided. This is where you can assist your clients to make sure that they get the cover they want. The following are common issues that you can help your clients with.
- Explaining policy endorsements clearly. In the event of policy changes being made, you must clearly explain to the client how the changes will impact the cover provided by the policy. This will ensure that the client has the cover they want and will avoid any surprises at the claim stage.
- Purchasing the correct cover based on their circumstances. For example, you must make sure that your client is insured for the correct vehicle use and the correct primary driver is stated on the policy.
- Choosing the correct sum insured amount. When choosing the policy sum insured, you must consider factors that affect the asset’s value, such as value-added tax, depreciation or appreciation in value over time. Insuring assets at the correct sum insured will avoid underinsurance for the client.
- Capturing the correct risk details. For example, the correct risk address where assets are kept must be recorded.
- Explaining the policy excess correctly. It is important for the client to understand the excess applicable to the policy upfront, so that they know how much funds they must have available to cover the excess if a claim event occurs.
Cover for today’s risk events
You can also assist clients in getting protection for the following events, which are seen more often today….
- Power surge: Cover against power surge is very relevant in the current climate, where the country is experiencing load shedding. Some insurers have seen an increase in power surge claims. Discovery Insure’s claims data shows they increased by as much as 50% in 2022.
- Vehicle theft: The South African Police Service’s latest crime statistics show that 5 866 hijackings were reported across the country between April and June 2022 – a 14% increase compared to the same period in 2021. This year-on-year increase means that a vehicle is estimated to be stolen every 22 minutes in South Africa. You can help your clients protect their vehicles against theft by making sure that they install a stolen vehicle recovery (SVR) device. Having a device that offers SVR capability and other safety features like sending an emergency alert to the insurer in case of a severe impact to the vehicle will enhance the client’s safety on the road.
- Inadequate sum insured for vehicles: According to TransUnion data, there was a three-fold increase in vehicle price inflation for new vehicles in 2022. This could have a negative impact on the value of the client’s vehicle, which may not increase as fast. Buying cover that boosts the vehicle’s sum insured amount by a specified percentage of the retail value can help beat the rising cost of vehicles.
Structuring the policy to improve affordability
Another critical area of advice concerns the cost of the policy. You can help your clients manage the cost of insurance as follows:
- Choosing an appropriate policy type. Selecting an insurer that offers a variety of policy options enables the client to choose the policy type that is most affordable for them, given their insurance needs.
- Managing the policy excess. Offering flexible excess options means the client can select the excess amount that results in the most affordable premium for them. An innovative offering insurers have introduced in this space is a funder account. This account can be used by clients to pay for their excess at claim stage.
- Managing their level of risk. By managing their risk well, clients can manage their insurance premium. For example, by driving well, clients can avoid accidents and reduce their claims. This may reduce their renewal premium. Clients may also get rewarded for good risk management. An example of such rewards is the ability for clients who drive well to earn up to 50% of their fuel spend as cash back. Such risk management measures can assist clients with premium affordability, and therefore make sure that they continue to get the protection they need even in these tough economic times.
Just like in the old days when insurance deals were sealed through handshakes, today we still see that insurance is all about human relationships. Therefore, financial advice will continue to be a critical part of offering the right products and superior service to clients.