The Financial Sector Charter, like the Competition Commissions enquiry into bank charges, has pushed a reluctant industry into thinking out of the box.
Businesses have a tendency to continue with practices as usual unless they are forced to do it differently. In varying degrees financial companies have come up with solutions to incorporate more South Africans into the financial industry.
Although groundbreaking, not all have been successful as companies discover the nuances of new markets. For example, Metropolitan brought out an innovative funeral policy that you could purchase via your cellphone. The idea was that people could buy cover for a short period of time — R10 would buy you R60 000 of life cover for one week. It was launched to coincide with the Easter holiday rush which is notorious for its road casualties.
However, the product was not as successful as they hoped because many potential customers believed it was too good to be true while others were concerned that their beneficiaries may be tempted to have them killed for the payout.
The product has been re-launched at a R10 premium for a month’s worth of cover and a payout of R15 000.
Metropolitan expects their new product, Cover2Go Cash Back Funeral Plan, to be more successful. It allows consumers to recoup all their premiums if they have not claimed after five years.
The product is sold through Shoprite where customers can pay the monthly R49,95 premium for the family funeral cover.
FNB recently launched its flexi-save 12-month fixed deposit product which pays 8,75% interest on the first R100 deposited and has no costs. In order to encourage people to open the account, FNB is giving away 150 000 official Fifa World Cup soccer balls and customers qualify for quarterly draws for World Cup tickets.
Roger Keip of FNB says that the experience with the Million-a-Month-Account (Mama), which was halted due to a judgement that said it competed with the National Lottery, shows that once people open a savings account they start to save.
Even though FNB is no longer giving away cash prizes on the Mama, 750 000 people have continued to save using the product.
In the case of the flexi-save account, although the minimum opening balance to qualify for a free ball is R500, the average deposit is more than three times that amount.
The account allows for two free withdrawals a year of up to 15% of the capital per withdrawal. In other words someone who has R1 000 invested would be able to draw out R300 during the year with no penalty. Keip says the product has been extremely successful with 500 people a day signing up and a high percentage of customers having never banked before.
Tackling Aids
The fact that funeral cover remains the most important insurance among low-income people is a stark reminder of the Aids pandemic our country faces.
Last year 1 000 Aids-related deaths were reported per day.
Where government has had to be brought along kicking and screaming, the life industry has met the challenge and South Africa is one of only two countries in the world, along with the Netherlands, where HIV-positive people have access to life insurance policies.
Sanlam, Old Mutual, Metropolitan, AllLife and AltRisk all offer life insurance policies to people who are HIV-positive. In addition to products that insure HIV-positive people, last year the Life Offices Association (LOA) announced that its member life offices would no longer apply existing HIV/Aids exclusions to life and disability policies.
As a result, no claim for a lump-sum death or disability benefit will be denied by any of these life companies based on the HIV/Aids status of the insured person, unless the policyholder is found guilty of material non-disclosure.
The exclusion clauses were waived for all types of life and disability cover that pay lump-sum benefits, including group life, credit life and funeral cover.
LOA member offices also scrapped HIV-specific waiting periods for new business.
Fatima Hassan, senior attorney with the ALP, described the decision by LOA member offices to waive HIV/Aids exclusions for existing policies as “totally groundbreaking and one of the biggest moves the life industry has ever made”.
“We believe that uncertainty about this disease resulted in the life industry imposing an outdated model on people living with HIV/Aids. For years the Aids Law Project has been representing beneficiaries who did not receive a benefit because the policyholders died after contracting the virus although they were HIV-negative when they took out their policies.”
This year the LOA launched a call centre to assist consumers who apply for life insurance policies that require an HIV test. This will provide consumers with telephonic pre-test counselling via a toll-free number before taking the HIV test.
Half of the costs of the call centre are funded by the National Pathology Group (NPG), which represents most of the private laboratories which conduct the HIV tests on behalf of life companies.
Counsellors inform callers of their rights, which include:
- The right not to be tested, which may, however, result in the application for life insurance being declined.
- The right to consider alternative life products that do not require testing for HIV.
- The right to confidential pre-test counselling, which will inform the applicant of the implications of taking the test.
- The right to have the test results treated confidentially.
- The right to post-test counselling should the test be positive.