Insured Peace of Mind
The New Year has arrived and many of us have made those 2011 resolutions yet again, but we often struggle to keep them. What are your goals this year? If you haven’t got insurance, there are many reasons why you should add this to your resolution list.
For many South Africans, their cars and homes are the most valuable possessions that they own. However, statistics show that very few South Africans insure even their most valuable possessions.
Insurance is unique in that you are paying for something that you may never see the benefit of. However, chances are that most people are likely to be involved in a car accident, or be the victim of a robbery at some point. “If you think about it, almost everyone you know has dented their car or had something stolen, and it’s those who were not insured who are sorry afterwards, vowing to get insured next time,” says Sedick Isaacs, Executive General Manager for Claims at Mutual & Federal.
Many consumers view insurance as a “grudge spend”. When times are tough, insurance premiums are often the first thing to fall by the wayside as people cut back on their expenses. Michael Petersen, CEO of Risk Benefit Solutions, says that often South Africans choose not to buy insurance for this reason. Other reasons include the strain on cash flow, not using a particular possession often enough to warrant the extra cost of insurance, and the cost of insurance versus the value of the item. Legislation also does not require South Africans to insure their possessions.
If you’re still pondering whether or not to get insurance, ask yourself if you can afford to lose the item in question. Louise Pharo, Head of Commercial Business at Santam, says insurance is an important part of good financial management and without it you could find yourself in financial difficulty.
Do your homework when shopping for insurance. Pharo says one of the biggest risks is under-insurance. “Consumers only look at the price and make their decision based on this. It is only in the event of a claim that people realise this,” she explains. Before signing a contract, always read the fine print. She recommends that consumers make use of brokers who understand the industry and have expert knowledge about insurance products.
Petersen advises consumers to speak to friends and family who already have insurance to find out which insurers have a good reputation. The Internet is also a good place to research insurance companies.
Check that the insurer is registered with the Financial Intermediaries Association of South Africa (FIA), The Financial Services Board (FSB) and that they are compliant with both the Financial Advisory and Intermediary Services Act (FAIS) and the Financial Intelligence Centre Act (FICA).
“Every year more South Africans hand over their money to unregistered companies that either do not pay out on claims at all, or assist in money laundering for organised crime,” Petersen warns.
Every South African should consider salary insurance. Lenerd Louw, CEO of Frank.net says that over two million South Africans lost their jobs last year and only 6% of people have some form of loss of earnings insurance. “If your new year’s resolution is to give up smoking, for less than a carton of cigarettes a month you can get adequate cover,” Louw says. If you get sick, are injured or you are unable to work, you will keep getting monthly pay cheques.
“In this day and age, adequate insurance isn’t a luxury. It is a necessity you’ll be grateful to have when the inevitable happens,” concludes Isaacs.
Compulsory third party insurance
The Government’s plans to make third party vehicle insurance compulsory for all South African drivers is likely to lead to a reduction in motor insurance premiums for motorists who already insure their vehicles.
Christelle Fourie, Managing Director of MUA Insurance, the executive home and motor insurer, says if more vehicles are insured, there will be a bigger premium pot for insurers. “Ultimately this means that lower premiums will be passed on to consumers, as the losses of the few will be compensated by the contributions of the many,” Fourie says.
She says the idea of establishing a compulsory insurance body is crucial in South Africa, where very few motorists currently insure their vehicles. Research suggests that South Africa has about 9.5 million motor vehicles, of which only approximately 35% are insured. This figure is expected to drop even further.
A decision on how to collect payments for compulsory insurance is still needed. Fourie says that the insurance could be attached to the vehicle itself, rather than the owner. The levy could also be collected when motorists renew their license discs. “This makes sense in terms of ease of legislating and collecting the payment. However, it could prove problematic if the annual premium is quite high,” she says.
Story by Wilma den Hartigh
