WILL tech­nol­ogy MAKE LIFE COVER CHEAPER?

In­ves­ti­gates two new fi­nan­cial tech­nol­ogy in­sur­ers

CityPress - - Business -

ew fi­nan­cial ser­vices com­pa­nies are start­ing to chal­lenge the sta­tus quo through tech­nol­ogy that en­ables them to en­gage with cus­tomers di­rectly and use data col­lected through the use of smart­phones, re­ward pro­grammes and so­cial me­dia to im­prove the ap­pli­ca­tion and un­der­writ­ing process. The aim of these new, tech­no­log­i­cally driven fi­nan­cial prod­ucts is to come to the mar­ket with more com­pet­i­tive rates cou­pled with flex­i­bil­ity to pro­vide so­lu­tions at an in­di­vid­ual level.

This month, I tested two new play­ers in the life in­sur­ance space, Sim­ply Fi­nan­cial Ser­vices and In­die Fi­nan­cial Plan­ning.

Sim­ply, as the name im­plies, fo­cuses on pro­vid­ing sim­ple, cost-ef­fec­tive cover, while In­die has built in a re­wards el­e­ment that acts as a sav­ings fund so that you re­ceive a pay­out ir­re­spec­tive of whether you make a claim.

Both use tech­nol­ogy that al­lows a cus­tomer to get cover in a mat­ter of min­utes by pro­vid­ing a sim­ple un­der­writ­ing and ap­pli­ca­tion process; although se­lec­tive ap­pli­ca­tions may have fol­low-up un­der­writ­ing pro­cesses, such as blood tests, if the com­pany feels the ap­pli­ca­tion car­ries a high risk.

LOW COST, NO FUSS

Sim­ply has aimed its of­fer­ing at the mass mar­ket by pro­vid­ing “no bells or whis­tles” cover at a low pre­mium. Although the prod­uct is tar­geted at in­di­vid­u­als earn­ing up to R45 000 a month, Sim­ply Fi­nan­cial Ser­vices CEO An­thony Miller says high­er­in­come earn­ers are also ap­ply­ing for the cover as they value sim­plic­ity and speed.

By us­ing tech­nol­ogy, in­clud­ing a chat­bot through Face­book mes­sen­ger, the com­pany can gen­er­ate life pol­icy quotes in sec­onds. Its poli­cies are un­der­writ­ten by Old Mu­tual Al­ter­na­tive Risk trans­fer.

It is not yet sell­ing life in­sur­ance through Face­book, but the Face­book chat­bot pro­vides a way to gen­er­ate a quote and set up a suit­able time for an agent to con­tact you. Al­ter­na­tively, you can sign up for a pol­icy on the web­site with­out any hu­man in­ter­ac­tion and it takes about 10 min­utes. If you use the web­site to take out the pol­icy, you re­ceive a 10% dis­count on your pre­mium.

To keep the pre­mi­ums as low as pos­si­ble, a Sim­ply pol­icy lim­its dis­abil­ity cover to im­pair­ment such as the loss of a limb, blind­ness or mo­bil­ity. Poli­cies start from as lit­tle as R59 a month and in­clude a fu­neral ben­e­fit for the prin­ci­pal mem­ber and their di­rect fam­ily.

There is also lim­ited un­der­writ­ing re­quired. An ap­pli­cant fills in three health ques­tions, cover is in­stan­ta­neous and no blood or med­i­cal tests are re­quired. Sim­ply will run ran­dom un­der­writ­ing tests on ap­pli­cants, but the cover is al­ready in force and will only be changed if it is found that the in­di­vid­ual was not truth­ful in their ap­pli­ca­tion – for ex­am­ple, if they claim to be a non-smoker but the blood test shows they smoke. Due to the lim­ited un­der­writ­ing, there is a wait­ing pe­riod on claims and only death or dis­abil­ity due to ac­ci­dents will be cov­ered in the first six months.

If an in­di­vid­ual does not make it through the filtering process be­cause they have a chronic, life-threat­en­ing ill­ness, they would still be of­fered cover for ac­ci­den­tal death or dis­abil­ity.

Since launch­ing in Jan­uary, Miller says they have iden­ti­fied three key mar­kets – Fam­ily Cover for a main bread­win­ner, Do­mes­tic Cover for em­ploy­ers who want to pro­vide cover for their do­mes­tic work­ers and Group Cover for peo­ple em­ployed by a small busi­nesses.

Do­mes­tic Cover and Group Cover is prov­ing pop­u­lar for em­ploy­ers who want to pro­vide a ba­sic life, dis­abil­ity and fu­neral cover for em­ploy­ees to en­sure that, if any­thing hap­pened to them, their fam­i­lies are not left des­ti­tute. your 5% any time af­ter the Bounty be­comes due.

This Bounty pro­vides younger peo­ple with a boost for their re­tire­ment sav­ings and it also pro­vides a lump sum pay­ment when they re­tire.

“Peo­ple of­ten don’t need life pro­tec­tion af­ter they re­tire as, by then, they are debt free, so a lot of the cover is no longer nec­es­sary. At the age of 70, what­ever is still in the Bounty is yours to take,” says Cas­tle­den.

How­ever, he adds that if you die be­fore the age of 70, your es­tate will not re­ceive the Bounty, but if you make a claim, such as for a crit­i­cal ill­ness, and you are still a client at the age of 70, you will re­ceive your Bounty.

So how can In­die af­ford to pay their cus­tomers a Bounty? Would it not be more ef­fi­cient to pass on the ben­e­fit in a lower pre­mium?

Cas­tle­den says that the cost sav­ing comes from the con­sis­tency of keep­ing cus­tomers be­cause lapses are ex­pen­sive for the in­dus­try. The upfront costs of ac­quir­ing a client are high and only pay off if the client stays for a long pe­riod of time.

“We want peo­ple to stay long enough to re­ceive their full Bounty pay­ment as it means we have cov­ered those upfront costs,” says Cas­tle­den.

He adds that the at­trac­tive­ness of pay­ing a Bounty also de­creases the costs of ac­qui­si­tion as they do not need a bro­ker force to go out and con­vince peo­ple to take out cover, thereby sav­ing on com­mis­sions. Cas­tle­den says that, if the cost of ac­qui­si­tion is lower than ex­pected, these sav­ings will be trans­ferred into lower pre­mi­ums.

They have also added fea­tures to make it at­trac­tive for younger peo­ple, such as a sim­ple un­der­writ­ing process, and flex­i­bil­ity that al­lows you to chop and change your cover and for tem­po­rary re­duc­tion in your cover (and lower pre­mi­ums) if you are fac­ing fi­nan­cial dif­fi­cul­ties.

They are also re­ly­ing on good un­der­writ­ing to keep costs low. For ex­am­ple, they have de­cided not to in­sure mo­tor­bike rid­ers, who fall into a high-risk cat­e­gory.

“We will give you a quote, but it will be so much higher that you will want to go to an­other in­surer.”

They also have a five-year sui­cide ex­clu­sion, which Cas­tle­den says has a big im­pact on pre­mium costs.

In­die pro­vides six prod­ucts – cover to set­tle your debts, fu­neral ben­e­fits, crit­i­cal ill­ness ben­e­fits, in­come to pro­vide for fi­nan­cial de­pen­dants, an in­come dis­abil­ity ben­e­fit and a lump sum dis­abil­ity ben­e­fit.

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