In the dynamic landscape of insurance and financial planning, one critical concern has emerged – the risk cover gap.
As economic uncertainties loom and individuals prioritise different aspects of their financial well-being, advisers and life insurance companies are facing challenges in bridging this gap.
We delve into this issue by engaging in a discussion with key industry experts – Evan Baars, Partner at NMG Consulting, Nic Smit, Bidvest Life’s Chief Product Actuary, and Melody Cloete, Bidvest Life Training Specialist. Their insights shed light on the hurdles and potential solutions in closing the risk cover gap.
The Challenge at Hand
Tony kickstarts the conversation by highlighting a prevailing trend: During tough economic times, individuals often compromise on crucial financial safeguards such as retirement planning, life insurance, and car insurance. As a result, a significant coverage gap has emerged, necessitating a comprehensive understanding of the underlying factors contributing to this issue.
Evan Baars emphasises the significant impact of the COVID-19 pandemic on insurance sales, with the dual challenges of affordability constraints and difficulties in the sales process. Advisers have encountered roadblocks in effectively placing business and managing the complexities of post-pandemic service levels.
Empowering Advisers and Enhancing Communication
Nic Smit weighs in on the issue by acknowledging the role of advisers and intermediaries as the driving force behind most life insurance sales. He emphasises the importance of positioning life cover effectively and empowering advisers to better communicate its value. Nic shares a compelling analogy, likening the process to selling a necessary product, like Brussels sprouts, which requires a unique approach tailored to its inherent value rather than attempting to create excitement akin to selling shoes on social media.
Evan Baars echoes this sentiment, highlighting that the gap lies not in access to insurance but in advisers’ ability to effectively sell it. The implementation gap stems from challenges in conveying the benefits of coverage to potential clients.
Bridging the Gap through Education and Engagement
Melody Cloete, with her expertise in training, delves into the crucial role of education in overcoming this challenge. Training encompasses more than just technical specifications; it involves imparting a comprehensive understanding of the product to clients. Melody emphasises consumer education as a key focus, ensuring clients comprehend the nuances of their coverage, including waiting periods and claims processes.
Moreover, Melody suggests that an adviser’s role extends beyond presenting quotes. By emphasising the “why” behind coverage and sharing real-life claims experiences, advisers can transform clients’ perceptions. When clients truly grasp the value of coverage, they are less likely to lapse their policies.
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Insights from Product Actuaries and the Complexities of Coverage
Nic Smit sheds light on the role of product actuaries and the challenges of designing insurance offerings. He underscores the importance of feedback from sales staff and advisers in refining product design. Leveraging insights from claims experiences, actuaries can create products that align with clients’ needs and experiences.
Simplicity in Design and Holistic Advice
Evan Baars addresses the tension between complexity and ease of business. While some advisers thrive on complexity, a growing emphasis on holistic advice pushes for simpler processes and products. This shift is driven by a desire for easier engagement and greater focus on clients’ comprehensive financial needs.
Balancing Investments and Risk Coverage
The discussion shifts to a common scenario where advisers tend to favour investment-focused advice for high-net-worth clients. Evan Baars and Melody Cloete emphasise the importance of risk coverage, even in high-net-worth scenarios. They stress that risk coverage is not just about protecting wealth but also ensuring liquidity for estate planning and addressing tax implications.
Nic Smit highlights the different perspectives among high-net-worth individuals based on their stage in life and accumulated wealth. He emphasises the value of risk coverage for young high earners, highlighting the importance of income protection.
Conclusion
The dialogue surrounding the risk cover gap underscores the multifaceted nature of the challenge and the strategies to overcome it. Advisers and life insurance companies must work together to empower advisers, educate clients, simplify processes, and emphasize the interconnectedness of investments and risk coverage.
As the financial landscape continues to evolve, closing the risk cover gap remains a vital endeavour to ensure the financial security and well-being of individuals and their families.