Life insurance is an essential element of building a sound financial future and as such policyholders should keep up to-date with what their policies provide, says Hollard Life Solutions head of underwritten intermediary sales, Steve Piper.
The life insurance market is dynamic, with consumers motivated by many factors when deciding on whether to stay or switch their insurance policies. There may be many reasons for considering a switch, among others, the possibility of lower premiums, better customer service, and advisor advice experience, as well as offers of better products and benefits.
At the moment, we are seeing that while the size of the new business market in long term insurance is not expanding, there is a significant amount of policy switching in the South African long-term insurance market. Industry insights show that on average more than 80% of new business written is from policyholders switching policy portfolios from their current insurer to another.
Affordability and financial stability are among some of the key drivers for consumers switching their life insurance policies. Policyholders are looking to pay lower premiums, which are determined by factors such as age, health, gender, coverage amount, term length, occupation, and hobbies.
But, before making that giant leap to a new provider with a different product, policyholders should always consider their decision very carefully. They should ask themselves the following questions before making the switch:
- Am I improving the quality of cover I currently have in place?
- What are the advantages to me and my family as a result of the switch?
- Will this switch fit in with my ability to remain financially stable?
Sometimes it is simply better to stay with the current insurer.
If cost is the only reason for wanting to change, policyholders should speak to their insurer or financial advisor to see if the company is able to match or better a competitor’s offer.
Choosing the right fit
If policyholders feel it is time to switch insurers, it is best to get professional advice from a broker or financial advisor about the available options.
Make sure to sign off on a financial needs analysis prepared by an advisor outlining why a switch is a good option.
It’s also important to make sure that the switch improves the existing cover and meets the needs of the policyholder and their family.
An advisor should be able to provide a detailed breakdown of the various cover options under consideration, including price, benefit structures, waiting periods, exclusions, new benefit options and the overall customer service experience.
It’s important to get several quotes before making that switch. The comparisons must be based on the same level of cover and benefits – compare like with like. Three quotes from three different insurers is a minimum requirement and confirm the benefit differences between each quote as these may have an impact at the claims stage.
Take the time to research each company’s track record.
While trusting the advisor is key, policyholders should ensure that all proposals are supported by confirmed evidence, with the correct documentation.
With life cover, policyholders need to be aware that they may be required to undergo updated medical examinations which may result in a change in benefits.
It is important to read the fine print carefully – and ask those probing questions: Will the proposed new cover make it easier to claim? Do the new terms of cover, including possible exclusions, put the consumer in a worse position than they are currently in?
Policyholders need to check whether there are any cancellation fees or waiting periods for the new cover. The new insurer may require an administration fee.
Often when policyholders switch insurers, there are misconceptions about what happens to funds contributed to an existing policy when switching. For risk-only policies (life cover), there is no financial value paid upon cancellation. However, if the policy has a risk plus a value component, for example, life cover and an investment, then the investment portion will be paid out to the policyholder on cancellation of the policy, or the funds may be transferred into an investment vehicle.
Making the change
Once the policyholder has found their new insurer it is important to inform all the parties concerned, the existing insurer, the new insurer and the existing advisor. Put everything in writing to keep a record of the changes.
And, last, but not least, make sure that the new policy is active immediately and that there will be no gap in the cover.
Steve Piper is the head of intermediary sales at Hollard Life Solutions.
