Insurers more flexible in preventing policy lapses
NOT THAT long ago, insurance companies had little sympathy for policyholders who couldn’t pay their premiums. Your cover lapsed after the stipulated grace period if you didn’t meet the required payment deadlines. Tough luck.
But a combination of factors appear to have made insurance companies more sympathetic to the hardships of their customers and, judging by the actions of two insurers, the industry is trying harder to accommodate hard-pressed consumers and not to lose them.
A lapsed policy is more serious in the case of life insurance than it is for short-term insurance. Life cover gets more expensive as you get older and you have to go through the underwriting process (medical questionnaire and assessment) all over again.
The requirements under the Policyholder Protection Rules that apply to life policies with monthly premiums are as follows: “If a premium under a policy … has not been paid on its due date, the insurer must notify the policyholder of the non-payment within 15 days after the payment was due, and the policy and the cover must … remain in force for a period of 15 days after that due date.”
What happens after that is up to you and your insurer. Reasons insurers are doing more to hold on to their policyholders and make premium payments more flexible include the introduction over the last decade of the Treating Customers Fairly legislative framework and the high lapse rates seen during the Covid-19 pandemic.
According to life industry statistics, in the first year of the pandemic, 2020, 10.4 million policies lapsed, compared with 8.8 million in 2019. Last year, the figure had dropped to 7.4 million.
Life insurer 1Life recently did a survey of its policyholder base, reporting that 50% of respondents said they were now ensuring they keep up with their premiums, compared with lower rates during the pandemic.
This begged the question: if half are keeping up with their premiums, the other half are still having difficulty in doing so – what is 1Life doing to hold onto these customers?
Carol Mazaka, consumer director at 1Life, says that in comparison to the Covid period, 1Life has seen an improvement in terms of people paying their premiums and an uptick in sales.
“In treating customers fairly, the intention upfront during the sale of a policy is to make sure the potential customer knows what to do when he or she can’t pay their premiums.
“For existing customers who are battling to keep up their premiums, we engage with them, offering them the option of reducing their cover – therefore reducing their premiums. Or we could consider spreading or deferring premiums for a month, or changing a customer's debit date.”
Mazaka says the insurer pro-actively communicates with customers who have missed a premium. “We have a retentions department that focuses on just these conversations, and tries to determine the customer’s core need at that point.
“So it’s not about leaving the customer
with no cover whatsoever, but making sure that, if they cannot afford to pay their premiums at that point, we have solutions.”
Metropolitan Getup, a division of Momentum Metropolitan that specialises in funeral cover, has found that its target market has been particularly hard hit by ongoing load shedding and rising fuel and food costs, which have compounded the economic effects of the pandemic.
Prin Munsamy, the solutions actuary at Metropolitan Getup, says this pressure on lower-income earners led to the insurer’s development of a flexible payment solution that will initially be added to its funeral plan and later rolled out across its full suite of products aimed at the low-income market.
Munsamy says premium collection is challenging, especially in the low-income market. Income volatility in this market, where many people work piecemeal, makes collection on a specific day of the month difficult.
“To meet these challenges, Metropolitan Getup has embarked on a new payment platform designed to supplement traditional collection mechanisms with a distinctly non-traditional approach to how clients pay,” he says
Through four “Any’s”, Munsamy says the platform gives policyholders more choice and flexibility and put control back into the hands of clients:
1. Any method. Consumers can select their payment method from an extended list of options that include cash (via retailers and spaza shops), digital payment platforms, EFT, credit/ debit card and debit or stop order, and can update this preference whenever they choose to do so.
2. Any time. Payment can be made at any time of the month, and premiums can be settled in several instalments, whenever the consumer has access to funds.
3. Any person. Payments can be made via several contributors, “tapping into community-centric payment behaviours”.
4. Any amount. Clients can pay whatever amount they can afford during the month, even if it is not the whole premium owing. Cover will be adjusted accordingly each month. “Clients with a good payment history will benefit from a sophisticated and unique model that adjusts their cover in line with the actual payments made,” Munsamy says.
“As the landscape continues to evolve, we expect that increased product flexibility will become the norm and innovation the order of the day, as insurers creatively respond to consumers’ shifting needs,” he says.