Helping customers keep their promises to themselves

The lifeline of premium protection cover

More than 10 million long-term life insurance policies lapsed in 2020, according to the Association for Savings and Investment South Africa (ASISA). The policy lapses, referred to in the recently released combined annual report from the offices of the Long-Term Insurance Ombudsman and the Short-Term Insurance Ombudsman, are largely attributed to job losses or reduced income related to the COVID-19 lockdowns last year.

Cover when they need it most

“These are alarming figures, but there is a lesson here. Customers want the comfort of knowing they have cover in place when they need it most. They can avoid the risk of their policies lapsing simply by opting to have premium protection in place when they take out policies,” says Jaco van der Merwe, Executive General Manager for Personal Financial Advice at Old Mutual. The unnerving truth is that during a pandemic such as the one we are currently experiencing, insurance cover has never been more essential. Old Mutual’s claims stats for 2020 reflect a rise of 22% in total claims paid, covering death, illness, disability and retrenchment. In the retrenchment cover category alone, there was a R3m or 30% increase in claims. Within this category, just over a third of claimants were between the ages of 30 and 40, and 76% were male.

Premium protection cover offers a guarantee

“Unfortunately, when economic times are tough, consumers tend to look for ways to cut their expenditure. Insurance, often seen as a less necessary expense, is one of the first options when it comes to cutting costs. Opting for premium protection cover would guarantee these consumers peace of mind in difficult financial circumstances,” he says. Depending on the kind of premium protection you take out, your premiums will be waived, and cover will continue if you die, become functionally impaired, disabled, or retrenched. In difficult times you also want to ensure that you have premium protection in place for your funeral product, and even temporary relief in the form of a premium holiday.

Customers who did not sign up for premium protection cover at the time of taking out their policy can add on this benefit at any time.

How to help financially strained customers

During times of financial uncertainty, customers are under severe emotional pressure. “This is where the role of a financial adviser becomes critical. Here are some steps to ensure that your customers feel like they have a workable solution,” Van der Merwe says.

• Provide a listening ear. Your customers may be feeling overwhelmed by their financial situation. Give them a safe space to sound out where they are financially and look at their budget logically.

• Review their financial plan. Discuss how their changed financial circumstances will impact their holistic financial plan. For example, they may need to draw on their emergency savings to tide them through until things improve.

• Reframe their perspective in a positive way. This is not just about telling your customer, “It’s okay”. You need to help them put aside their emotions and gain clear perspective. For example, they may be stressed out because they accessed their savings and are now worried about retirement. As their financial adviser, you can remind them of other times when they dealt with financial problems, or of the progress they made to reach their current goals.

“It is only to be expected that life will have certain detours along the way. Against that backdrop, the benefits of premium protection cover far outweigh the additional cost that it may add to the customer’s overall premium. You can’t put a price on the peace of mind you gain knowing that your family will be financially provided for or your financial goals can still be achieved. This is but one way of how a financial adviser can add value to the relationship with customers, and there is no replacement for having those open and honest discussions to understand customers’ underlying needs,” Van der Merwe concludes.

Jaco van der Merwe, Executive General Manager: Personal Financial Advice, Old Mutual