In his latest address to the nation, the President said some economic activity will be allowed to resume, subject to extreme precautions to limit community transmission and outbreaks, and some businesses will be allowed to resume operations under specific conditions. Although some restrictions are lifted and, over time, we might move to Phase 1, the long-term impact of the pandemic on an individual’s ability to afford premiums is under threat.
To ease the immediate burden, the FSCA has communicated with regulated entities, through various Communications and Notices, to bear in mind the current circumstances and assist their customers with even more empathy, flexibility and understanding during these difficult times.
With regards to lapses and renewals, the FSCA specifically mentioned that although they understand that the industry needs to manage its risks and additional exposure during this time, the FSCA wishes to highlight the following expectations:
| ● | Communication regarding renewals should be clear and any changes to policies due to the impact of the COVID-19 should be highlighted to the policyholder; |
| ● | Any additional premium reviews as a result of the impact of COVID-19 should be communicated to the Authority ahead of time, together with the impact of the premium review on policyholders; |
| ● | Additional measures should be considered to assist policyholders, where possible, not to lapse a policy due to the impact of the COVID-19 and possible alternative options should be communicated clearly and in advance to policyholders; and |
| ● | Additional measures should be considered to ensure that the communication regarding the impact of non-payments and possible lapses are communicated to policyholders directly and clearly. |
As a result, most insurers have announced relief measures to their customers. “Insurance plays a vital role in protecting the financial future of families. For this reason, Liberty is giving customers the option on certain products to not pay, or pay a reduced premium on their cover up until 30 September 2020 (T&Cs apply) during the COVID-19 period.” Johan Minnie, Managing Executive for Client & Adviser Experience at Liberty stated in a News24 article.
Sanlam is offering its policyholders the option of cutting their life, disability and critical illness cover back to 50% to make premiums more affordable, Sanlam Life CEO Karin Muller told the media. Momentum Life is also offering policyholders the option of reducing their cover rather than losing it, according to George Kolbe, head of marketing for Momentum Life Insurance.
In a recent ASISA media release, Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee, also highlights that life insurers and banks are expecting a significant increase in the number of policyholders unable to pay their premiums on the next payment date, given the financial hardship experienced by many South Africans as a result of the current COVID-19 pandemic lockdown situation. He emphasises that life insurers have looked into many ways of making premium relief possible for policyholders who have been in good standing. “… but we would need these clients to contact their insurers urgently to discuss options,” De Villiers advises.
He points out that simply allowing debit orders to bounce due to a lack of funds may result in an impaired credit record as well as valuable risk cover lapsing. When a policy lapses, it means that the life, disability, critical illness or income protection cover falls away, putting the continued financial security of the insured’s dependents at risk.
As a result of these unusual times, the FAIS Ombud also advised policyholders to contact their insurer or financial adviser to discuss different relief approaches.
Your clients need your guidance and support now like never before. Given Hobson’s choice of lapsing policies to survive financially, while running the risk of contracting the deadly virus, is certainly a major concern for most.
In addition, those who have religiously paid their premiums over many years now face the real threat of being unable to obtain life cover again should they lapse their policies, or paying substantially more should they take out cover later.
As pointed out in a recent article, the value of life cover has never been more prominent than in current times. Most insurers have special arrangements during lockdown for clients to effect or increase life cover with relaxed underwriting requirements.
Be there for your clients in these challenging times. Make sure you understand exactly what your provider of choice offers, both in terms of current and new life cover, and see to your clients’ needs. It will be so much easier than under normal conditions.
Not to mention preserving your own commission.
