Innovation in income protection

NIC SMIT Head of Product and Pricing, FMI (a Division of Bidvest Life Ltd)

Traditional income-protection risk assessment models are outdated as they do not sufficiently cater for the growing number of gig workers (like freelancers, independent contractors and those earning from multiple income sources), who are often not working consistently, have no formal contracts in place, or who are unable to define what their anticipated income will be at any given point.

At FMI, we’ve come up with a solution where these individuals can now qualify for cover to protect their income against the risk of injury or illness. How we’ve done this is by separating a person’s occupation from how they earn their income, which we call ‘occupation status’. By having clear definitions, rules and procedures around occupation status, we can widen the range of people who can now qualify for income protection, and include more of those who choose to earn their income in a different way.

Independent contractors:

We define an independent contractor as someone who is employed to work for an employer under a fixedterm, temporary or project employment contract. The traditional approach to underwriting contract workers results in a binary outcome – either full income protection cover is granted, or cover is declined. This results in any contract worker that doesn’t fit neatly into the insurer’s definition of good risk being unable to take out cover. At FMI, through our clear underwriting process, we can assess a contract worker across multiple scenarios, as well as offer a range of different cover solutions, which opens up cover to a wider range of contract workers than ever before.

WE ARE BRINGING CHANGE AND INNOVATION TO A RECEPTIVE MARKETPLACE

Freelancers:

Much of the confusion that arises when freelancers apply for cover is that the term ‘freelancer’ means different things to different people. Freelancers may be those who have signed a temporary or fixed-term employment contract with one or more employers. In these cases, a freelancer would fall into the independent contractor occupation status. But what about freelancers who haven’t signed a non-permanent employment contract, but rather quote for business and invoice for time spent working? In these cases, these freelancers would fall into the self-employed occupation status. There is often an incorrect perception that these lives work inconsistently, which introduces risk to any income protection cover offered to them. But compare someone who works like this against a self-employed electrician who visits homes to repair and install wiring and lighting. These two lives perform very different occupations, but from an occupation status perspective they are very similar – both only work when they have jobs to perform, and the risk of inconsistent work for both lives is almost identical.

Multiple income streams:

Many South Africans today desperately need the additional income that a side hustle brings them. We have designed clear rules that we use to determine how significant and consistent the work is, and we have different solutions that allow your clients to protect that income even where it is inconsistent.

We are bringing change and innovation to a receptive marketplace, and will continue to do so in order to remain relevant in our ever-evolving employment landscape.