According to an article in New York Life, the premise of life insurance is “to give you peace of mind while you’re alive, and financial support for your loved ones when you’re gone.”
It’s ultimately to insure your income. Understood as simply as this, one has to critically ask – does the traditional solution of life and disability lump sum cover adequately fulfil the real need for buying life insurance in the first place? When you consider that not only are lump sum benefits limited to address the risk of permanent disability and death; ignoring the reality of an injury or illness (your most likely risk), but that the income generated from a lump sum is dependent on the health of future inflation and investment rates, it’s glaringly obvious that lump sum cover alone isn’t a sufficient solution.
It’s important for us to truly understand the underlying need. Customers are looking for financial protection so that they can continue to meet their monthly financial responsibilities if they’re unable to continue earning due to injury, illness or death.
There is still a place for lump sum benefits to take care of those additional expenses that come with adapting to living with a disability, or for estate duties in the event of death. But we need to adopt a more a holistic approach through the effective combination of both income benefits (to take care of monthly expenses) and lump sum benefits (for once-off costs).
Income protection is effectively income insurance and can be seen as complementing medical aid cover. Most individuals already understand the importance and necessity of having medical aid. Income protection should be viewed in the same way. If we understand the importance of having medical aid in place to protect us against such risks and to cover our medical bills, why is there still such little appreciation for the type of insurance that will replace our monthly income should we fall ill or become injured?
And yet, income protection is still the most undersold form of insurance, making up only 6% of the life insurance market1. However, the number of customers with income protection is set to grow over the coming decade as product innovation allows for more occupations and work statuses to qualify for this type of cover.
Innovating in areas which address new ways of working has been a real focus area for life insurer FMI (a Division of Bidvest Life Ltd), who are able to provide income cover to riskier occupations and those more sensitive to claim (e.g. oil-rig workers and musicians) and now more recently, for more unorthodox occupation statuses such as freelancers, independent contractors and individuals with multiple sources of income.
FMI is bringing change and continued innovation to a receptive marketplace. The insurer is making waves by adapting and responding to an ever-changing employment landscape as it evolves.
With this shift comes further change as advisers respond to meet their clients’ evolving needs. More and more advisers realise the advantages of income benefits. Advisers play a vital role in shifting how individuals choose to protect themselves against life’s risks and to help ensure they have appropriate and adequate cover. Customers want a simple solution they can clearly understand and relate to, and the peace of mind that they have purchased a product that will protect them when they need it most, should they be unable to work due illness or injury.
The value of personal interaction, expert guidance and trust is still an integral part of how customers buy long-term insurance. According to the Beyond Life Global Consumer Study 2019 – 2020, the value placed on trust is still the number one need when it comes to buying life insurance, across all age groups. Almost half (47%) of respondents said they always prefer human interaction, and this figure varied very little across the different age groups.
The study found that the online world is not the first source of information when it comes to how prospective clients research and select life insurance products. Customers continue to place greatest trust in advice from families, friends and financial advisers. And whilst tech advances facilitate operations and service delivery, it’s not at the forefront for generating new leads. Selling life insurance needs real people, trust and human connections.
That’s why FMI has produced a series of short videos that celebrate South Africans who work in diverse occupations to help advisers shift their client conversations to an Income First approach and to build long lasting relationships.
To watch FMI’s ImpACTer stories and to share with your clients, go to https://www.fmi.co.za/impacters
1Swiss-Re New Business Volume Survey 2018