Personal Cover for the affluent market

Recent research by the Life Offices' Association (LOA) highlighted the very large national insurance gap which is currently greater than R10 trillion. The research, which looked at life and disability cover across households in various socio-economic groups, pointed out that, were a household's main earner to die or become disabled, the average family would be forced to cut living expenses by at least 50%.

Independent research into the needs of affluent clients has highlighted a number of aspects that this market regards as important when purchasing a personal cover solution. One of these is simplicity. There are many complex products on the market offering numerous benefits, often leaving the person unsure as to exactly what it is they're covered for. This market expressed a preference for products that offer only the best and most appropriate benefits for them.

Closely linked to this is the issue of transparency. By selecting a product with fewer benefits, clients are more likely to have a deeper understanding of these benefits.

Also evident, is a close correlation between income and life expectancy. This is due to healthier lifestyles and access to medical care - both of which result in fewer claims. Affluent clients therefore tend to qualify for better rates on their life cover. In fact, it may even be possible that when reviewing the affluent client pool risk experience, their rates could decrease - if they've selected a yearly rated premium payment option.

How much cover do your clients need?
Having decided on the type of cover needed, the next most important decision is how much cover one needs. Important considerations would include the number of dependants; outstanding debt; and whether one's parents are financially independent.

High income earners whose families are accustomed to a certain lifestyle, and who may still have debts, would do well to seek professional advice. AMPS (All Media Product Survey) figures from December 2007 show that only 46.77% of those with a R40K + household income have life cover.

A qualified, independent estate planner can assist affluent individuals with liquidity calculations to ensure that they won't be forced to sell assets to provide for liquidity in their estate.

Dread disease cover
Serious diseases such as stroke, heart attack and cancer, usually strike without warning. The insured person may not necessarily be medically unable to continue working, and therefore may not be able to claim disability cover.

These three diseases account for in the region of 85% - 95% of all medical claims each year. This is where simplicity comes in. It may be better for the individual to be covered comprehensively, rather than marginally, for particular diseases.

Disability definitions
Understanding the definitions and the fine-print may mean the difference between the client purchasing an ideal solution or one which is totally unsuited to his lifestyle. For example, a surgeon insured for "own occupation" will receive a payout if he loses a thumb. The same surgeon, insured for "own and similar occupation" would not receive a payout. The reason being, he is deemed to be able to perform a similar task.

There are a number of other available benefits in the market that would appeal to the affluent client. It's up to the clients and their financial intermediaries to dig deeper and understand exactly what they're buying and what they're covered for.