Beeld recently published an article on the Outsurance advert which offers clients all their premiums back after 15 years. It certainly makes interesting reading, and raises a few points which I am sure the general public, and particularly those clever DIY specialists, are unaware of.
This subject was also covered by Greg Sneddon of the Financial Coach on his website and in a radio interview. The CEO of Outsurance asked that they be given an opportunity to provide him with a fair comparison, to which Sneddon responded:
All the information in the post was taken directly from the quote that they sent to me and was compared with an alternate product that is freely available to consumers.
However, in the interests of fairness, I have agreed to remove the post to give them time to provide me with a “fair” comparison of “apples with apples”. Once we have this information from them, we will revisit the post and update the information.
In the Beeld article, Sneddon provided some interesting facts and figures.
An Outsurance Essential Life policy of R500 000 will cost the average non-smoker, 40 year old, about R484 per month. A simular policy from an opposition company, such as Altrisk, will only cost you in the region of R110. This is R374 less than the Outsurance policy, says Greg Sneddon, a registered financial planner of The Financial Coach in Cape Town.
Sneddon calculated that the Outsurance policy holder can expect a return of R134 000 after 15 years, should he not claim during that period. Should you opt for the cheaper R110 policy, and invest the difference (R374) in a balanced fund (at a real rate of return of 5% per year), you would have R211 000 after 15 years. And you are able to submit a claim during this period.
Ernst Gouws, head of Outsurance, is adamant that the product should not be compared in this manner. He claims that policies from Liberty, Old Mutual and Sanlam would naturally be cheaper because clients are compelled to undergo various medical tests.
The Outsurance Essential Life product is more like a credit life product. You are only asked a few questions and there are no medical tests. This is a totally different market. Outsurance has another product which is cheaper. (My translation)
A few weeks ago, a reader sent me details of his experience after obtaining a quote from Outsurance. I posted the reader’s enquiry on their website early in June, but have not received a response yet. This is what the reader had to say:
After a horrific experience with this company on the car insurance side, I decided to investigate the promised 15 year return of premium story. I received a quote for R400 more p.m. than my Liberty Policy. IT DID NOT INCLUDE THE 15 YEAR MONEY BACK OFFER. On asking for a quote including the money back, my premium was increased by a further R500 p.m. There is a compulsory 8% increase where the cover increases by 5% until the 5th year, where the premium jumps by an additional 50%.
There are other conditions attached to the Outsurance policy as well, according to the Beeld article: the full sum assured is not paid out in the first year, and no illness related claims may be submitted in the first six months.
I have three concerns:
- If underwriting is not done at the application stage, then it must be done when a claim arises. Do clients understand the terms and conditions of what they are buying and the risk of not disclosing information that may be critical to the claim being paid out or not?
- How many claims will be repudiated due to non-disclosure of pre-existing conditions? A few years ago, this was specifically mentioned in the FAIS Ombud’s annual report.
- Are call centre agents capable of helping a client make an informed decision, given the high staff turnover?
Die artikel in Beeld is net in Afrikaans beskikbaar. Kliek hier om dit af te laai.
We received the following request via e-mail on Friday Afternoon, just before 17h00. In order to enable our readers to form a balanced perspective on the matter, we are glad to oblige.
Would you mind adding a link from our life insurance page to allow your readers to get a chance to read our full product description?