brokers
Ensure your business is ready for new plain language regulations
Submitted by byrnie on Wed, 2011-03-16 20:42Image/Video:
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Short description:
Much has been made of the implementation of the Consumer Protection Act (CPA), which is due to come into force in October this year, and its impact on the insurance industry. One of these is the fact that all documentation that the insurer provides to consumers will need to be written in plain language.
Content:
Much has been made of the implementation of the Consumer Protection Act (CPA), which is due to come into force in October this year, and its impact on the insurance industry. One of these is the fact that all documentation that the insurer provides to consumers will need to be written in plain language.
According to the provisions set out in the CPA, insurers must ensure that all of their policies are written in plain language, in terms that can be easily understood and without being unjust or unfair. The CPA also stipulates that any exclusions that limit the liability of the insurer also have to be drawn to the attention of the consumer in plain language.
The National Consumer Commission is due to publish guidelines soon regarding how to determine whether a document satisfies the CPA’s requirements. However, at MUA we are already rewording all of our documentation to comply with these new plain language requirements,at considerable cost and effort to the company, in order to be totally transparent with our clients and to avoid any possible non-compliance with the CPA in the future.
While this is an expensive and time consuming process for insurance companies, these new regulations are a welcome development to ensure consumers fully comprehend what their insurance policies cover.
However, the plain language requirements set out in the CPA do also present some serious implications for some brokers and their businesses as well.
A number of brokers – particularly those operating within large institutions - often have their own policy wordings for the documentation they provide to clients. As a result, they will also be responsible for ensuring that all paperwork that they prepare for clients also complies with the new legislation.
If an insurance company – or a broker – is deemed not to have complied with the plain language requirements, then clients will have recourse for legal action if their insurance claims are repudiated.
The CPA states that a document is in plain language if an ordinary consumer (policyholder) with average literacy skills and minimal experience as a consumer of insurance services, can be expected to understand the content, significance and import of the document without undue effort, having regard to:
- The context, comprehensiveness and cosnistency of the document;
- Organisation form and style;
- Vocabulary, usage and sentence structure; and;
- The use of any illustrations, examples, headings or other aids to reading and understanding
The introduction of the CPA means that in addition to the time, effort and cost of drawing up new paperwork, there is also now an increased risk on the part of the insurer and/or broker. If they are shown not to have complied with the CPA, there might be cost implications and/or reputational damage involved.
A broker’s own professional indemnity insurance may also need to increase in order to accommodate the new regulations. This will add increased cost pressures on brokers, who are already facing concerns over how they should charge for their services: through commission on the products they sell, for the advice and expertise they offer or through the number of hours they spend on a client.
In the long run, the plain language requirements are a good thing for the insurance industry as they should help to foster a greater level of understanding of our product offering among consumers, however, it is important for brokers and insurers alike to make themselves fully aware of the legislation and of how the CPA will impact on their business.
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Make sure your client’s wealth is protected
Submitted by byrnie on Wed, 2011-03-16 20:37Image/Video:
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Any advisor who has dealt with high net worth individuals will know that their insurance requirements differ quite significantly from the average customer.
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Any advisor who has dealt with high net worth individuals will know that their insurance requirements differ quite significantly from the average customer.
Christelle Fourie, Managing Director of MUA Insurance, the executive motor and home insurance specialist, has identified five of the most common pitfalls for brokers to look out for when it comes to insuring the possessions of high net worth individuals.
Under and over insurance of property
We have seen large fluctuations in the market values of homes in the affluent areas of South Africa over recent years. Market value is often confused with insurance replacement value and this is the reason why it is so important for high-net worth homeowners to obtain a professional insurance replacement valuation for their home and its contents. At MUA we have seen massive underinsurance on property, but also overinsurance. For example, the market value of a property situated in a suburb like Bakoven or Sandhurst may be set at R25 million, but the actual replacement value of the building is only in the region of R10 million. These clients are paying premiums on a value which will not be paid out to them in the event of a claim.
Fragmentation of cover
As a result of the nature of the high net worth individual, purchases of fine art, new cars or holiday homes are made over a period of time, with the result that insurance can often be fragmented with multiple policies with different brokers and insurers. By consolidating their insurance cover, you will probably be able to reduce costs for your clients as well as avoid any gaps in their coverage, which may only be discovered once a claim has been filed.
Work with the right people
An insurer that deals exclusively with the general public is unlikely to be properly equipped to deal with the complex set of needs of your client. In contrast, insurers who specialize in providing cover to high-net worth individuals often tailor their policies to meet the very specific needs of their customer base.
It is also important to consider the specialist claims handling ability of the chosen insurer – not all insurers are geared towards having a Bentley fixed following an accident or a silk Persian rug repaired after water damage.
Insure valuables correctly
Whether your client is an avid collector of fine art, wines or antique jewellery it is important that all their valuables are correctly evaluated. Certain policies aimed at high-net worth individuals do not require homeowners to specify each and every item in their home. However, a valuable collection of art or piece of jewellery needs to be properly assessed and valued and should not just be included under a basic home insurance policy.
Read the fine print
As brokers know, the devil is always in the detail. However, when it comes to insuring high-net worth individuals, the fine print becomes even more important. It is therefore crucial to understand what exclusions apply under these policies and how these could impact on their client. In most cases, an individual would be happier to pay more for additional coverage than discover too late that their policy does not meet their needs.
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Understanding your niche is key to a successful business
Submitted by Christelle on Mon, 2011-01-31 00:00Content:
As risk carriers, the insurance industry often sees that the most successful brokers are those who understand exactly what it is they are good at – their unique value proposition – and use this to the advantage of their clients.
This is particularly evident within the competitive personal lines insurance market where it has become increasingly important for brokers to identify a chosen niche in which they are comfortable and use these skills and expertise to grow their portfolio. Effective segmentation of a client base also translates directly into improved sales figures and a higher retention of clients.
By segmenting clients and maintaining a focus on a specific niche, brokers can extract the maximum benefit out of their network; establishing themselves and their business, as experts in a particular field; and can start attracting a similar breed of clients, thereby resulting in increased revenue.
Establishing this niche market not only means that marketing and sales efforts are more focused and ultimately more successful, but also that clients are far less likely to move their business if they feel their needs are properly understood.
We see this frequently with brokers who specialize in a particular service offering. For example, a broker who specializes in thatch insurance will be far more equipped to understand the risks of their clients and be able to advise them appropriately. A broker who understands the unique needs of thatched roofed home owners will also be able to provide a client with specialist advice from the time of taking out the policy right through to the event of a fire claim. Such brokers are also more likely to know the thatching companies and to strike up a relationship for new business referrals to ensure they build a sustainable source of new business leads.
At MUA we have seen this work for a diverse range of client segments. Some of the top performing brokers are those who have chosen niches such as foreign clients owning homes in SA, high value property home owners or exotic car owners. These brokers then customise their insurance offerings to suit the needs of their clients.
In addition to the obvious sales benefits of catering to a niche client base, the insurance industry – brokers and insurers alike – will soon be obliged to change the manner in which we conduct our business to be customer-centric through initiatives such as the Treating Customers Fairly (TCF) principles launched by the FSB.
With the opportunity that a specialized service offering presents, there are also challenges that brokers need to be cognizant of. However, it is important to realize that challenges posed by a particular niche can actually prove to be a strength for a business and form an important part of a broker’s strategic differentiator.
For example, high net worth clients demand personal attention and very quick turnaround times, particularly on claims. Gearing your business model to be able to meet these needs provides an opportunity once again to differentiate your service offering from others around you.
In a world where every aspect of business has become increasingly more compartmentalised and focused, it is vital that brokers meet these changing needs. Those brokers who understand the value of having a truly niche approach are certain to reap the benefits.
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- Christelle's blog
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