Life insurance: rip-off or rewarding?

EARLIER this year, members of Parliament had a debate about the role life insurance companies play in Namibia.

This debate highlighted a number of concerns regarding the real value life insurance has for ordinary Namibians. Most of the participants in the debate related their concerns to personal experiences with life insurance companies.The debate is welcomed by the life insurance industry and it certainly is a wake-up call to the industry.If the leaders in our nation have these perceptions about the life insurance industry, how many other Namibians share their views? I suspect many.This raises the question why the impressions of so many are negative.On the one hand it seems to be poor service and a lack of advice; on the other hand it seems to be a lack of understanding.There are no excuses for poor service.Policyholders deserve to get the same attention and care when they claim insurance benefits as when they take out policies.Most life insurers in Namibia today have offices throughout Namibia, call centres with local phone numbers and websites.This means policyholders can choose which way they prefer to be served.Claiming on an insurance policy is not a complex process.You need to prove your identity, and your right to claim, and then provide bank account details.What often makes this process complex is the absence of documents to prove a valid claim.This very requirement (for valid documents) is what also protects policyholders against fraudulent claims.To understand this, you need to understand the principle of life insurance.Policyholders agree to pool their money in a fund and agree to pay their fellow policyholders’ benefits from this fund, should a claim arise.By not requiring proof of a valid claim, the fund would be quickly depleted.INCREASING PREMIUMS The only way to prevent the fund from running out would be to increase the contributions (premiums) that are paid into the fund.But this would make life insurance unaffordable to the man on the street.The allegation that insurance companies are quick to accept a policy application and pay commission to the broker or advisor, but slow to pay benefits, is sad.Against this allegation, though, stand the statistics.Life insurance companies paid an average of N$5,4 million per day in benefits in the first 6 months of 2007.This is a significant amount of money.On average, benefits of around N$30 000 per policyholder were paid out in the first half of 2007.The role of the life insurance company is to make sure the pool of funds never runs out so that there are always enough funds to pay all possible claims.This is a legal requirement that is regularly checked by Namfisa, the regulator of life insurance companies.Life insurers must have a reserve of assets above the total claims that could become payable, also to protect the interest of policyholders.WIDE VARIETY Taking out a policy may seem difficult to many, as there are so many different insurance companies and a wide variety of options available.The basic options are quite similar though.The core options offered by most companies are life cover, funeral cover, disability cover and savings options.The best way to choose between all the options is to consult an advisor or broker.The industry is spending a lot of money on training advisers and brokers to give advice on products.More important though is to train advisers and brokers to give financial planning advice.It is critically important to know where your priorities in terms of providing for your and your family’s future should be.Only once you have the full picture will you know whether providing an income for yourself or your family in case of an accident, sickness or any other unforeseen event is more important than providing for your retirement or for the further education of your children.A financial adviser or broker is trained to provide this picture to you.Once you’ve determined your priorities, an advisor or broker can assist you in choosing the best products to meet these needs.The ideal situation is that you build a relationship of trust with an adviser or broker, so that he or she can continue to plan your financial future with you.It is often this lack of a trust relationship that gives rise to the perceptions of poor service and bad advice.In reality most financial advisers and brokers prefer to build long-term relationships with their clients.A large proportion of advisers and brokers have been in the industry for more than 10 years, and they have many long-standing relationships and spend most of their time just advising these clients.Their clients will also attest to the value these advisers and brokers have contributed towards their financial prosperity.These advisers and brokers serve their clients with dedication and assist them in all their dealings with life insurance companies.I suspect that, contrary to the impression created by the debate in Parliament, there are many satisfied clients of insurance companies.It seems as if the key to their satisfaction lies in the fact that they have built up a good and trusted relationship with their financial advisor or broker.I am convinced that all insurance companies would jump at the opportunity to introduce you to skilled advisers or brokers.* This article was contributed by Raimund Snyders, Chief Executive of Old Mutual Life Assurance Company (Namibia) and Chairman of the Life Assurers’ Association of Namibia.Most of the participants in the debate related their concerns to personal experiences with life insurance companies.The debate is welcomed by the life insurance industry and it certainly is a wake-up call to the industry.If the leaders in our nation have these perceptions about the life insurance industry, how many other Namibians share their views? I suspect many.This raises the question why the impressions of so many are negative.On the one hand it seems to be poor service and a lack of advice; on the other hand it seems to be a lack of understanding.There are no excuses for poor service.Policyholders deserve to get the same attention and care when they claim insurance benefits as when they take out policies.Most life insurers in Namibia today have offices throughout Namibia, call centres with local phone numbers and websites.This means policyholders can choose which way they prefer to be served.Claiming on an insurance policy is not a complex process.You need to prove your identity, and your right to claim, and then provide bank account details.What often makes this process complex is the absence of documents to prove a valid claim.This very requirement (for valid documents) is what also protects policyholders against fraudulent claims.To understand this, you need to understand the principle of life insurance.Policyholders agree to pool their money in a fund and agree to pay their fellow policyholders’ benefits from this fund, should a claim arise.By not requiring proof of a valid claim, the fund would be quickly depleted. INCREASING PREMIUMS The only way to prevent the fund from running out would be to increase the contributions (premiums) that are paid into the fund.But this would make life insurance unaffordable to the man on the street.The allegation that insurance companies are quick to accept a policy application and pay commission to the broker or advisor, but slow to pay benefits, is sad.Against this allegation, though, stand the statistics.Life insurance companies paid an average of N$5,4 million per day in benefits in the first 6 months of 2007.This is a significant amount of money.On average, benefits of around N$30 000 per policyholder were paid out in the first half of 2007.The role of the life insurance company is to make sure the pool of funds never runs out so that there are always enough funds to pay all possible claims.This is a legal requirement that is regularly checked by Namfisa, the regulator of life insurance companies.Life insurers must have a reserve of assets above the total claims that could become payable, also to protect the interest of policyholders.WIDE VARIETY Taking out a policy may seem difficult to many, as there are so many different insurance companies and a wide variety of options available.The basic options are quite similar though.The core options offered by most companies are life cover, funeral cover, disability cover and savings options.The best way to choose between all the options is to consult an advisor or broker.The industry is spending a lot of money on training advisers and brokers to give advice on products.More important though is to train advisers and brokers to give financial planning advice.It is critically important to know where your priorities in terms of providing for your and your family’s future should be.Only once you have the full picture will you know whether providing an income for yourself or your family in case of an accident, sickness or any other unforeseen event is more important than providing for your retirement or for the further education of your children.A financial adviser or broker is trained to provide this picture to you.Once you’ve determined your priorities, an advisor or broker can assist you in choosing the best products to meet these needs.The ideal situation is that you build a relationship of trust with an adviser or broker, so that he or she can continue to plan your financial future with you.It is often this lack of a trust relationship that gives rise to the perceptions of poor service and bad advice.In reality most financial advisers and brokers prefer to build long-term relationships with their clients.A large proportion of advisers and brokers have been in the industry for more than 10 years, and they have many long-standing relationships and spend most of their time just advising these clients.Their clients will also attest to the value these advisers and brokers have contributed towards their financial prosperity.These advisers and brokers serve their clients with dedication and assist them in all their dealings with life insurance companies.I suspect that, contrary to the impression created by the debate in Parliament, there are many satisfied clients of insurance companies.It seems as if the key to their satisfaction lies in the fact that they have built up a good and trusted relationship with their financial advisor or broker.I am convinced that all insurance companies would jump at the opportunity to introduce you to skilled advisers or brokers.* This article was contributed by Raimund Snyders, Chief Executive of Old Mutual Life Assurance Company (Namibia) and Chairman of the Life Assurers’ Association of Namibia.