Pieter Schoombee argues that the life assurance industry is=20 often far from transparent
THE fat cats on the assurance industry gravy train are=20 notoriously touchy about criticism, as Dorian Wharton-Hood=20 so insultingly illustrates in the Mail & Guardian’s April=20 21 to 27 issue.
Big assurance business has evidently decided that Professor=20 George Marx is getting too big for his boots and should be=20 slapped down. Wharton-Hood was given the job, but he=20 botched it. It’s a case of the lady doth protest so much,=20 so petulantly and so spitefully that she in fact feeds the=20 suspicion that she has much to hide.
And, as a spokesman for Liberty Life and “other reputable=20 life assurers”, Wharton-Hood is indeed speaking for=20 interests that are frequently lacking in transparency.
For instance, Liberty Life recently treated newspaper=20 readers to some hyperbole about its annual results. In a=20 number of publications, four or five full pages were=20 bought, boastful announcements were made about=20 international achievements and columnists were talked into=20 repeating acrobatic claims.
The money and effort were in all likelihood well worthwhile=20 — in terms of shareholders and in terms of Liberty’s sales=20 effort. It helped their salesmen to sell policies. But it=20 did not help the people who bought those policies.
The holders of smoothed policies, those good people who=20 regularly pay their premiums blindly believing that their=20 money is not being used to keep fat cats in luxury, had to=20 wait a few weeks longer for Liberty’s bonus or growth=20 declaration, the figure that would tell policyholders what=20 was in it for them. And when it came — and proved to be=20 embarrassingly lower than the rates declared by Liberty’s=20 main competitors — there was no fanfare. Policyholders=20 were quietly informed by mail. Compared with the earlier=20 circus, the information pertinent to policyholders was not=20 merely whispered, it was kept quiet.
In his response to Marx’s criticism, Wharton-Hood is less=20 then frank:
* He states that Marx “even comments that commission is=20 not disclosed to the client”, claiming that commission is a=20 matter of common knowledge because it is “limited by=20 regulation” — as if the average purchaser of an assurance=20 product gets the Government Gazette delivered with his M&G.
How many people are told, when they buy insurance, that as=20 much as 80 percent of the premiums they pay in the first=20 year is in fact commission going to the salesperson? And=20 that more commission gets paid in the second year? And that=20 every time a premium is increased “automatically” to=20 compensate for inflation, still more commission is=20 subtracted from the amount “invested”? And, it was Wharton- Hood who accused Marx of saying things that are, “sometimes=20 incomprehensible and in some cases totally untrue!”
* Liberty Life, Wharton-Hood claims, “has a comprehensive=20 and sophisticated training programme”. What he does not say=20 is how much of that training comprises sales techniques=20 which add no value other than parting the clients from=20 their money more deftly.=20
* Wharton-Hood makes the claim that “surrender values=20 often constitute more than reasonable investments to the=20 policy holders” and the creative assumption that “surrender=20 values represent fair value for money”.=20
Doubtless the fat cats in the life offices and the=20 salespeople for whom Wharton-Hood speaks are happy with=20 surrenders. The client, on the other hand, who is the=20 victim of such a situation, often experiences it as simply=20 a loss of money.
But what makes his claim truly surprising, is Liberty’s=20 recent bonus declaration. Relative to the alternatives and=20 to inflation, a growth rate of 10,06 percent does not=20 constitute a “more than reasonable” investment, even for=20 those policies which have not been surrendered.
Hopefully this is only the beginning of the debate about=20 the South African assurance industry.
Peter Schoombee has been a public relations officer in the=20 life assurance industry for a number of years