By: Nic Smit, Chief Product Actuary at Bidvest Life
The Covid-19 pandemic highlighted the need for the life insurance industry to change. It pushed us to expand our services to better meet our clients’ needs by adapting to societal changes and finding ways to cover more risks and provide more value to our clients through tailored solutions.
When it comes to life cover, there are two major challenges with the industry today: First, insurers need to move beyond the traditional lump sum product offering. Second, they need to find ways to differentiate and individualise their offering. This is possible by developing innovative products that enable financial advisers and their clients to cover specific needs, rather than choosing from a bucket of similar products whose only real differentiating factor is price.
The solution lies in developing new products or enhancing existing products to solve real problems and deliver tangible value, based on actual insights. By creating a continuous feedback loop involving everyone in the value chain – including employees and financial advisers who interact with clients regularly – and then interrogating the results, insurers can identify trends and develop products that fill the gaps.
Take Life Income benefits as an example. In 2013, Bidvest Life introduced Life Income benefits as an alternative to lump sum payouts. Lump sums can be hard to manage due to investment risks, longevity, inflation, and the temptation to spend a lump sum on non-essential items. Life Income benefits offer a more manageable alternative. They mimic the income stream that you are trying to replace when you’re no longer around so that your dependents are looked after when they need it the most, they simplify estate planning, and they are more affordable. This approach is particularly relevant in South Africa, where every working person supports themselves and an average of three dependents*.
While insurers try to pay out life cover lump sum claims within a reasonable time frame, non-disclosure complications can lead to payments being drawn out, and such delays can seriously impact on beneficiaries’ short-term finances. For instance, if the life insured’s bank account is frozen, the spouse may be unable to buy groceries or pay school fees. Or a self-employed surviving spouse may need to take some time off but cannot afford not to earn an income during this time.
To address this immediate financial need, Bidvest Life has introduced the Life Priority benefit as a rider to the Life Lump Sum benefit. This benefit has reduced the checks that need to be completed for non-
disclosure for deaths that occur after the first two years of cover. This means that where the payment of the main life insurance benefit is delayed because non-disclosure checks need to be completed, the Life Priority benefit will often be able to pay out earlier, which eases the pressure on the
policyholder’s family.
For financial advisers, having access to life cover products that offer more relevant benefits, insure broader risks, and provide claim certainty when clients need it the most, can help you gain a competitive edge that goes beyond just pricing.
* Source: SA Institute of Race Relations.