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Sun City – The biggest hurdle facing the insurance industry is that consumers simply don’t trust financial advisers, according to a life insurance expert, who has a vision for a client centric approach.
Momentum Retail CEO Mark van der Watt said even cellphone companies rank higher in terms of trust and brokers needed to change their approach in order to solve this dilemma.
Speaking to industry leaders at the Momentum Risk Summit in Sun City on Tuesday, he said regulation changes and technological advances were other issues facing the industry, but that trust was the biggest.
“Surveys worldwide have shown that banks and financial services businesses like insurers just aren’t trusted,” Van der Watt told Fin24.
The answer to this problem was for the industry to become client centric. “It’s really about putting the clients in the middle of everything we do,” he said.
Instead of building products that would do well financially, the industry should simply provide what the client wants.
“Financial advice is the glue that brings all of this together,” he said.
Listen to the full podcast and browse the slide show as Van der Watt talks through the presentation he delivered to the summit’s delegates:
See the slide show:
The big insurance gap
Van der Watt presented research conducted by True South, which showed that the insurance gap had increase from R18.4trn in 2010 to R24trn in 2013.
The gap included R9.3trn in death cover and R14.7trn in disability cover.
The disability gap was alarming, said Van der Watt, as only 7% to 25% of the temporary disability need had been covered. “They could find themselves in dire financial circumstances, which is very worrying,” he said, adding that this also presented an opportunity for insurers.
The benefit mix averaged at 61% for life cover, 30% for disability cover and 9% for critical illness cover in 2011. “There is only one alternative and that is to increase our cover for our clients,” said Van der Watt.
“There is an opportunity for advisers who focussed on the savings environment to now focus on the risk environment,” he said.
Life cover for a 100-year-old
He said that the greatest opportunity was still within the richest sector of the South African population as there was a R4899bn gap for the 20% richest.
Van der Watt cautioned that affluent South Africans could live well past 100 and that not enough people were looking at longevity benefits.
A study in the UK showed that one million people would live to 100 in the UK by the end of the century. “We sweep over this and ignore this,” he said. “While South Africa’s mortality rate stands at 44, we have an affluent population that have similar life expectations as those in England.”
RiskSA's Sarah Bassett interviewed Van der Watt at the summit:
