Misaligned cover costs consumers millions
Published |
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2010
Thu
29
Apr
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TENS of millions of rands are wasted every month by clients of short-term insurance companies because they fail to align their policy provisions with the real risks they face.
The cost-saving alert comes from BJM Insurance Brokers, a specialist service provider at BJM Private Clients, a wealth adviser with dedicated focus on the needs of high net worth individuals.
According to BJM Insurance Brokers CEO Willem Coetzee, savings of about 15% a year are achievable through better alignment of risk and cover.
“For better-off South Africans, this runs into savings of thousands of rands a year on short-term insurance,” says Coetzee.
He says insurance company actuaries price risk by analysing probabilities. An astute consumer in consultation with a properly qualified insurance professional can carry out a similar assessment of probabilities to achieve a close, highly personalised fit between insurance protection and the real risks run by the family concerned.
To demonstrate the potential for savings, BJM Insurance Brokers developed a case-study of a notional client resident in a secure estate in Bellville, Cape Town. The fictional client owned a property in the estate, the contents of the house and two vehicles. The house was bonded by a bank. All other assets were owned by the client.
The annual cost of premiums for comprehensive insurance on all assets totalled R28,379.
A review of risk exposure showed that a burglary had not previously occurred in the estate because of excellent estate security. Insurance on house contents was therefore reduced to cover only fire and storm damage. The client also decided to remain uninsured for personal effects (all risks cover).
The house remained comprehensively insured in line with bank requirements.
A review of motor vehicle claims showed that the client had made only two claims in nine years; one for R12,500, the other for R2,100.
The client therefore decided to share in the motor insurance risk by taking a higher voluntary excess of R10 000. To reduce vehicle theft risks, basic tracking devices were installed in both vehicles.
After allowing for vehicle tracking costs, the net costs faced by the client fell from R28,379 to R24,605 – an annual saving of R3,774 or 15%.
“A potential saving of about 15% is by no means unusual,” says Coetzee. “Insurance policies define the perils against which you can insure. To a varying degree, you then have the option of selecting from available covers.
“By matching covers with the risks you wish to insure, you get value for money from your insurance policy. This and the avoidance of circumstances that expose your assets to loss or damage will reduce the cost of insurance.
“In view of continuing pressure on consumers, it is surprising that risk reviews like this are not carried out more frequently. Savings across the insurance industry could run into tens of millions of rands every month.”
BJM Private Clients is a division of the Barnard Jacobs Mellet (BJM) financial services group. The BJM group offering includes stock broking, insurance broking, wealth management, trust and fiduciary services, asset management and corporate advisory.
Disclosure:
Barnard Jacobs Mellet Private Client Services (Pty) Ltd is a member of the JSE and an authorised credit and financial services provider.
BJM Insurance Brokers (Pty) Ltd is an authorised financial services provider.
BJM Wealth (Pty) Ltd is an authorised financial services provider.
Source: Clear Distinction Communications
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