Miranda Nokwanda Tshuma, Aris Brokers
It is at a time when disaster strikes that you start to think of the “what if”.
Most South Africans are currently experiencing salary pay cuts, retrenchments, no income due to not working, while some are simply not getting paid, a classic situation of no work no pay.
Any disaster is a learning period and something has to be taken away from the Covid-19 pandemic. In this moment, clients are thinking how they could have avoided the loss of salary, tight budget and a situation where the businesses cannot pay workers despite the fact that they are working from home. It is at this time of the pandemic that the thought of salary income protection hits for both businesses and individuals.
The value of income protection is only truly realised when crisis strikes and insurance companies should grab hold of this moment and extensively advertise income protection because it is the time to seize the moment and increase the uptake of the income protection product.
Statistics provided by FMI for 2019 states that South African savings is at -0,10%. This reality of the figures is that South Africans are not saving enough and are spending way more than they are earning.
72,1% households in South Africa are spending their income on debts. As a result, income protection is then seen as just another bill to pay and no one wants another bill on top of debts they are facing, states the report.
Income first approach
FMI (2019) recommends that you protect your income first and then consider how much lump-sum disability cover you need. It also states that income protection cover is typically 20% to 25% cheaper than lump-sum disability cover and this is the time for insurers to market the product as is cheap and this time clients will be listening.
South Africans are not aware that the physical ability to earn income is your biggest asset. Income protection insurance is designed to give you cover if you cannot earn an income due to serious illness or injury and it ensures you to continue receiving an income until one retires or is able to go back to work.
A study by Whitehead (2015) found that income protection has never been a best seller partly because it is seen as complex, more expensive and pays out on a monthly basis and not as a once-off lump. He attributes this challenge being mostly caused by insurers as they are not comprehensively informing clients.
According to the Financial Times (2018), some experts argue that income protection is a little known form of cover which is actually the best form of protection if bought right but has not been packaged to be made a necessity to the public by insurers.
With that said, insurers can package income protection the same way that motor insurance has been packaged. Motor insurance has been made and portrayed as a necessity because of the countless advertisements on TV, radio and posters.
Another measure that can be taken by insurers is to increase growth in this product by clearing literature and sales aids. Bates (2019) states that the Institute and Faculty of actuaries found that income protection insurance has lack of awareness and there is a perception amongst clients that it is expensive. According to Cover UK (2018), the sales message of income protection should be easily put across so that everyone thinks it is a good product to have.
The problem is, when people begin to look at the policy they think it is complicated and the underwriting takes a long time. Insurers in South Africa should increase awareness especially in this period of Covid 19 when clients have been in distress and now know the meaning of not having income due to unforeseen circumstances.
However, in relaying the message, it has to be clear that income protection will cover if a client is infected with Covid-19 and cannot work but however not working because of the national lockdown is not covered and one has to apply for financial assistance at their bank or the government.
The constant contemplation of wanting to be more prepared for life as a result of the Covid-19 pandemic has clearly shown people that anything can happen at any time.
Many have felt the pinch of not getting a salary and it is up to the insurers to better educate people because yesterday is gone and tomorrow is not assured.
TRUST – Contact us for personalised insurance solutions.
Centriq’s insurance subsidiaries are authorised financial services providers