Schalk Malan, CEO at BrightRock
Like other aspects of our industry, income security has been considerably impacted by COVID-19, but it can be an area of insurance that isn’t given the attention it deserves. Here are a few factors that you as a financial adviser should bear in mind when reviewing your clients’ income protection cover.
Claimants who had an unexpected change in their occupation or duties
As we know, many small businesses have been forced to make changes to their operations because of the impact of COVID-19. Many start-up companies found their income was reduced significantly; a recent study conducted by FinFund, for example, found that 75% of all SMEs experienced a significant decrease in revenue from the end of March to August 2020. As a result, these small businesses have had to make some very hard choices, in some cases resulting in employees being retrenched. This also means that business owners who may have previously spent 95% of their time behind a desk, may now physically be involved in all aspects of the company, whether it be filling orders, packing shelves, or doing deliveries.
With many insurance companies, this could have an effect on life insurance claims, for example, a temporary disability claim from a work accident. This is because most insurers require policyholders to inform them of any changes in occupation or their work duties after taking out their cover. Where clients are not aware of this requirement and fail to inform their insurer in time of a change in work duties, it could leave them exposed. BrightRock, however, does not require our clients to notify us of a change in occupation. We will cover existing clients whose occupation has changed after they took out their policy, even if they are doing a job that we wouldn’t ordinarily provide cover for.
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Claimants who became unemployed
Most insurers do not pay disability claims for clients who have become unemployed, even if they have continued to pay their monthly premiums. In a COVID context, this is a big problem, as more and more people are becoming unemployed precisely at a time when South Africans are more likely than ever to get sick. At BrightRock, however, we cover clients for a period of up to 12 months from the date of their unemployment. So, if you have been unemployed for a few months and something happens to you that would have rendered you unable to work had you still been working, then we would pay the claim as such, based on what you were doing and earning when you last worked. The spirit behind this position is that we believe that most clients would be actively looking for work while they were unemployed and that their situation of joblessness is just a temporary one.
Claimants who find it difficult to prove their income
This is another case where insurers would require policyholders to inform them of the change in their circumstances. For example, let’s say our small business owner in my first example has had to close his doors temporarily. He is now doing DIY jobs to earn some income to tide him over. Should he need to claim, however, he won’t be able to prove that his earnings match the income amount he is insured for. In these cases, BrightRock encourages its clients to submit their proof of income when they take out their policy, or anytime before a claim event happens. If they have done this, then we will cover them for the income amount that they are insured for, not necessarily what they’re earning in their current situation. So, a businessman who was earning R40,000 a month before his company closed and is now earning R10,000 a month through odd jobs will still get a payment of R40,000 a month if a claim event happens during this period, provided he had proven his larger income to us before losing his job.
Policies with sustainable increases
Turning our attention away from the claim stage and towards policy increases, it might seem obvious to point out that during this period of economic difficulty, the last thing clients need right now is a steep premium increase. In financially tough times like these, this could result in clients having to cancel their policy as their increase is simply not sustainable, which would leave them completely exposed. As a financial adviser, a key concern is ensuring that your clients have a sustainable cover that they can afford for a long period to help them weather this current storm and any future periods of uncertainty. That’s why it is critical to avoid aggressive funding patterns that may initially look attractive to clients only to become unsustainable four or five years down the line, perhaps when we are in the midst of another crisis.
As a financial adviser, you play an invaluable role in helping your clients navigate all of these situations and ensure they are fully informed about all the nuances that can help them claim without hassle. It’s also important to advise your clients to be open with their insurance company should they fall on hard times. As your experience has most likely taught you, insurers are usually willing to make a plan for clients who are in a phase of financial difficulty and are unable to pay their full premiums for a short period.
Encourage clients to reach out and be upfront about the difficulties they face, so they don’t have to lose their cover at a time when they need it most.