In one of our Smart Money tips, we looked at the wisdom of not cancelling your insurance coverage in hard times. It seems consumers are in fact opting to keep some insurance in place, rather than cancelling coverage entirely, which is good news.
According to Seamus Casserly, president at the Financial Intermediaries Association of Southern Africa (FIA), only a minority of clients are cancelling policies. But consumers are definitely looking for more competitive premiums, which accounts for the movement among consumers.
“We have noticed that there is still a tendency to insure the absolute minimum as a last resort before cancelling, which is very positive news for the insurance industry. This indicates most people still recognise the need to maintain catastrophe protection as a minimum,” says Casserly. A ‘catastrophe’ would refer to, say, the write-off of an asset.
Information recently released by the Credit Regulator revealed that at the end of March 2010, credit bureaus had records for 18,21-million credit-active consumers. Of these, the Credit Regulator said only 54% were classified as being in good standing. Casserly says these statistics highlight the fact that consumers are continuing to struggle to get their finances back on track and may continue to opt for catastrophe cover only.
Are brokers keeping up?
It is important that your broker continues to meet your changing needs, so you need to assess whether he or she can recommend the most appropriate, affordable product, says Casserly. If you are struggling financially, your broker should recommend products that limit cover, which will reduce premiums, but will still provide protection for essentials. A good example would be ensuring that you at least have a hospital plan in place, even if you have to reject a full medical aid offering.
Your broker should assist you to review items on a policy and limit them to what is critical. Similarly, review the value of a motor vehicle on a policy and limit the extent of motor cover taken out, especially for older vehicles.
Casserly says that brokers are still important for consumers, particularly as insurers are tightening up on issuing claims.
“Settling claims to the benefit of clients is one of the most critical parts of a broker’s job and in the current environment, with many insurers is looking to limit payouts, it is crucial to have a broker on your side,” he says.
Tips for consumers:
- Do what you can to mitigate against a loss. Bear in mind that the rainy season may well wreak havoc on the roads — check your tyre treads, windscreen wipers and so on. Then check your policy. Are you correctly insured?
- In terms of cost saving, look at the values you’re insured for and take an excess, which can reduce your premiums. If you’re paying R5 000, see if you can save R1 000. Negotiate.
- R5 000 won’t break the bank, but R50 000 certainly will, so be savvy and look after your assets. It’s always better to rely on your own policy than on someone else’s, so don’t ditch your insurance.
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