Some disruptions change our lives. Television, which brought the world into our living-rooms. The Internet, which opened the portal to information and knowledge. The cellular phone, which cut the wires of personal communication.
And some disruptions change life itself.
Just three years ago, BrightRock introduced the concept of needs-matched life insurance, challenging some of the industry’s most deeply-entrenched beliefs. For many years, says Schalk Malan, Executive Director at BrightRock, the life industry has been providing blocks of cover that grow – to a maximum term, usually retirement age – with a premium that increases too.
But as clients reach retirement age, their risk profile changes. They have fewer pay cheques to protect, and large debts are settled. And yet policies are designed, and priced, to provide the highest level of cover when your insurance need is at its lowest.
This is confirmed by the True South insurance gap study, commissioned by the Association for Savings and Investments of South Africa (ASISA), which finds that earners in the older age categories tend to be over-insured. In effect, says Schalk, clients are paying a considerable amount for wasted premiums.
“They are paying from rand one for the sacrificed cover which could have secured much more efficiently and appropriately structured cover upfront.”
In addition, clients are less insurable at older ages, he adds. “Should they later need to increase cover for critical illnesses, they may find that they’re no longer insurable.” Because needs-matched cover from BrightRock is priced accurately for the correct term, based on the client’s financial exposure, clients get almost double the cover up-front.
On average, BrightRock clients are able to buy about 40% more cover on their whole policy, using needs-matched technology, than they would with a competitor for the same premium.
Schalk has been invited to speak in Germany and Australia about BrightRock’s product structure and the way it addresses the regulatory and consumerist challenges faced by the life insurance industry internationally.
“We’re excited about the possibilities this new technology creates, not only for the growth of our business, but for the future of our industry,” says Schalk.
But what does this mean for consumers? Schalk suggests that policyholders meet regularly with their financial advisers to check the level and term of their capital disability cover, and ensure that it’s right for their needs. He has the following tips for you and your adviser:
Your greatest financial asset is your ability to earn an income, so it is important is protect your future pay cheques until retirement. And while you’re more likely to suffer an illness or injury the closer you get to retirement, your financial exposure is highest in your thirties and forties when you’ve got more pay cheques to cover and a higher outstanding debt on your home loan.
If your cover is set to grow steeply over time, you may be overpaying today for cover that you’re likely to reduce anyway as you get closer to retirement age and your financial exposure decreases.
Often, if affordability is an issue, your financial adviser may choose an age-rated funding pattern for you. This means your cover may start off cheaper at the outset, but may increase steeply as you age, with your cover increasing too. This may prove unsustainable in the long term, forcing you to reduce your cover down in future as premiums get higher. It’s possible to increase your initial cover at a sustainable premium, by setting your cover and premium increases to align to expected changes in your financial exposure over time.
One of the biggest problems with policyholders adjusting their cover down, is that they’re not only sacrificing the value of the premiums they’ve already paid for cover to retirement age (the policy is priced to retirement age from day one, so you pay for future increases from your very first premium) but also the loss of insurability.
If your needs change in unexpected ways after you’ve reduced your cover – for example, you find you have to work longer than you planned, setting your retirement back a few years – you may need to undergo underwriting again (medical tests to check your risk).
If your health has deteriorated since you were first underwritten, you may pay much more for cover or find you can’t get the extra cover you need at all.
BrightRock offers various options to allow you to secure cover in future should your needs change, free of charge, on all its standard policies and without many of the restrictions that you may have with other insurers in the market.
You want to get there happily and safely, and you want to enjoy the journey. But there are obstacles along the way: potholes that can trip you up and scuttle your best-laid plans.
Life is a highway that leads you to the ultimate destination. Your future. You want to get there happily and safely, and you want to enjoy the journey. But there are obstacles along the way: potholes that can trip you up and scuttle your best-laid plans.
That’s why it’s important to get in gear for a better tomorrow, by making sure that you’re financially roadworthy. Are you in control of your spending? Do you feel financially secure?
For almost two-thirds of South Africans, according to the Consumer Financial Vulnerability Index, compiled by MBD and Unisa, the answer, in both cases, is no.
And yet it is possible to take charge of your money and your life, says BrightRock’s Executive Director: Distribution, Sean Hanlon. As the big holiday season rush gets underway, Sean offers some pointers for avoiding the potholes and staying on track. The key to making your money last, he says, is to “start with what you’ve got”.
If you pack your own lunch, instead of buying takeaways, for example, you could save up to R500 a month. There are many easy to use mobile apps, including the free 22seven (22seven.com), developed in South Africa, that can help you track when and how you’re spending your money, says Sean.
Knowing where your money is going, down to the last cent, will empower you to make the right financial decisions. Identify your priorities, and work hard at digging your way out of debt. Also see Maya Fisher-French’s article on great budgeting tips.
Pay off your highest interest debts, such as store cards and credit cards, as soon as you can. Once you’ve paid off your debts, you can start saving. And don’t forget to set aside some money, ideally equivalent to three months’ salary, as an emergency fund.
Planning is the key to financial security, says Sean. You can save an average of 10% by paying school fees in advance. If you book your holiday early, you can save up to 40%.
If you’re buying a home or car, save as much as you can for a bigger deposit. The smaller your loan or shorter your loan term, the less interest you pay. Taking charge of your finances also means being a savvy shopper. “Make conscious spending decisions,” says Sean. Shop around for the best deal, in-store and online, and negotiate, negotiate, negotiate.
Even when it comes to your medical expenses, you have the right to negotiate with healthcare providers. You can save by asking for a discount – don’t be shy! At the same time, don’t compromise on quality. For some expenses, like brakes and tyres, your mattress and your toothbrush, it’s cheaper in the long run to buy the best.
If you’re fortunate enough to get a bonus, put it to good use. Put money in your bond, pay off debt, boost your emergency fund or add to your retirement savings.
You’re in charge of your money, and you’ve got the power to make it last. But don’t try to do it all by yourself. A trusted, qualified financial adviser can make a wealth of difference. You can check our your adviser’s professional and industry credentials at www.fpi.co.za or www.fsb.co.za.
So here’s all you need to do to get ready for the road ahead:
Please note: These tips don’t constitute financial advice. It’s important that you get financial advice from an independent financial adviser who is qualified to assist you.
It’s a proud moment for any parent when a child stands ready, face beaming, uniform neatly-pressed, backpack in hand, to begin one of life’s great adventures on the first day of school.
Blink, and that same child is standing on a stage, wearing mortar board and gown, to accept a hard-won scroll on Graduation Day at university.
The years flash by in a parade of academic and sporting achievements, tempered by the nagging reminders that a good education costs not just time, but money. That’s one of the main reasons why parents take out life insurance – to safeguard their children’s future when they’re no longer around to provide.
If you’re a BrightRock policyholder, you can choose a unique needs-matched solution that will exactly meet your childcare needs, should you suffer an illness, injury or die before your children reach financial independence.
We understand that childcare costs can vary considerably per child, even within the same family.
This is why, with our childcare cover, policyholders can customise the cover for each child, providing not just for school or tuition fees, but for extra murals, sporting equipment, tours, clothing, pocket money, future costs of a car, cell phone bills, travel, holidays and even groceries.
And when your bright achiever makes that big leap from high school to university, you’re covered for the jump in costs by our unique tertiary education step-up. This allows parents to provide for an automatic increase – of 0%, 50%, 200% or 300% – both in cover (pre-claim) and in pay-outs (post-claim) for the education needs of a specific child at the end of the year in which that child reaches the age of 18 years.
Once chosen, the step-up in cover is automatic and requires no underwriting.
Your premiums will be priced not to spike at this age, but will increase only by the amount you initially selected. That means additional cover, without any nasty surprises.
With tertiary education step-up from BrightRock, you’ll be able to provide for the expected increase in tuition fees as well as additional costs, such as your child’s transport and accommodation at university. By taking into account the portion of household expenses linked to each child, and adding this to the childcare needs cover, BrightRock is able to offer parents cover that is more appropriate and tailored to their family’s needs.
And in an industry first from BrightRock, you’ll be able to choose, at claims stage, whether the payout in respect of childcare needs should be made as a once off lump-sum, or a series of recurring monthly pay-outs.
This applies to cover for an illness or injury with a financial impact that is either permanent or leads to the death of the insured parent.
With your childcare needs in mind, you’ll be able to state your own cover amount, and the benefits can also be used for whatever you see fit at claims stage. Benefits can be paid to the beneficiaries you nominate, rather than only to an academic institution.
The pay-outs can continue until the specific age at which the parents expect that child to be financially independent, rather than the standard age of 18 or 21 years.
Our more efficiently-priced cover provides better value and frees up funds for parents to buy more cover where it’s needed.
On average, BrightRock clients save 30% on their monthly premiums.
On top of that, when the childcare cover is no longer required — for example when your child becomes financially independent — you can choose to convert childcare premiums to premiums for other needs.
Where clients have insured more than R1 500 for two or more events, and have cover for additional expenses, their children automatically qualify for additional expense needs cover. This cover is available from birth, and applies to the more than 300 additional expenses clinical conditions, as well as 12 child-specific conditions.
How it works – a case in point
A BrightRock client, a consultant from Nelspruit, took out his BrightRock policy in May 2013 and saved 28% on his monthly premiums thanks to our needs-matched efficiency. His key reason for getting cover was to ensure his wife and two children would be taken care of if he were to die. Just four months later, he suffered a severe heart attach at the age of 51 years and passed away. His family decided to receive their pay-out for childcare needs as a regular monthly amount. By choosing to receive these recurring pay-outs rather than the lump sum, the family is assured of a monthly pay-out of R5620 for each child. This monthly amount grows every year, as shown in the graphs below, and will double after the children have matriculated, thanks to tertiary step-up.
For more information about BrightRock’s cover for child additional expense needs, please consult your BrightRock financial adviser.
It takes a very sharp, very bright mind to compute the variables for every quotation generated for a BrightRock policyholder. Meet Flint, our super-computer processing application.
When a BrightRock financial adviser sits down to prepare a quotation for a client, you can be sure that there’s a whole lot of thinking going on.
Happily, the lion’s share of that superhuman deliberation is handled by a smart and sophisticated software application called Flint.
That’s the program developed by BrightRock’s actuaries and systems developers, to accommodate the multitude of variables at the heart of our tailor-made philosophy of life.
As Leopold Malan, founding partner and Executive Director of Processing at BrightRock explains, Flint allows clients to tailor the growth and behaviour of their cover with unprecedented precision. “The technology and computing power to do this just didn’t exist ten years ago,” says Leopold.
Now, with expert insight and input from your financial adviser, Flint simply crunches the numbers and makes life easier for all concerned.
Here’s how it works. If you choose cover for debt, such as an outstanding bond, or for your childcare needs, the cover can decrease automatically over time, as the amount of cover you need decreases. Cover for healthcare and household needs, on the other hand, can continue to grow for the rest of the policyholder’s life. With traditional life insurance policies, these changes would not happen dynamically. Instead, you – with your financial adviser’s help – would have to ask your life insurer to adjust your cover down if you found, after a few years, that you no longer needed some of the cover. And because you had paid from your first premium for the cover that you had now decided to sacrifice, you would lose money in the process too. Because traditional product structures in the market have been unable to price this into the premium, cover has tended to be needlessly expensive and wasteful.
In part, this is because existing technology could not generate the sophisticated calculations required to adjust premiums dynamically over time, in relation to the decreasing cover need.
Instead, cover and premium amounts could only be calculated based on fixed relationships from year to year.
But now, thanks to BrightRock’s unique calculation methodology, powered by Flint, we are able to calculate cover dynamically.
That means your cover is priced correctly, right from the very first premium, allowing you to save an average of 30% on your monthly premiums from day one.. There’s no waste, and you can get much closer to the risk-planning objectives you’ve set in consultation with your financial adviser.
Twenty-five million calculations per premium. That’s a lot of processing power. That’s a lot of flexibility. That’s a lot of thinking…for life. And every calculation is designed just for you!
Because your life insurance needs change as your life changes, we’ve come up with a bright new way to keep you covered for life. Introducing the BrightRock automatic cover conversion facility.
Love, so the poets and songwriters tell us, is the force that makes the world go round. Bankers take a less romantic view: it’s money, money, money that keeps the planet spinning on its axis.
Technologists will argue, in the 21st Century, that data and information are the drivers of perpetual motion. But here at BrightRock, we take a different view.
We believe that life turns on the power of change, from one season, one moment to the next. That’s why we’re changing the way life works, through our unique needs-matched life insurance that
changes as your needs change.
One of its special features is the Cover Conversion. It’s an industry first, and it allows you, the policyholder, to “redirect” your premiums from one insurance need to another.
Let’s say you’ve paid off your bond and have had another child since taking out your policy. With traditional life insurance, you would lose the cover, for which you’ve already undergone underwriting, in that particular area of your risk portfolio.
This means you would lose the value you’ve built up by paying for cover, and not having claimed – even while you may remain underinsured in another area.
But with our cover conversion facility, you can simply use the premiums for your bond cover to boost your cover, on death, for childcare needs. To use another example, perhaps you’re nearing
retirement, and no longer require as much illness or injury and death cover as before. But maybe you need more additional expenses cover.
Easy: use our automatic cover conversion facility to redirect your premiums to your new area of need, free of charge and free of medical underwriting. You can do this whenever your needs change, not just when cover for a specific need has expired.
Subject to certain conditions, you can even redirect your expiring death cover to buy more death cover – even if your health has worsened or you’ve made a claim.
Our cover conversion is an automatic feature on all standard BrightRock policies, and is fundamental to the efficiency of our needsmatched product design.
We believe that being able to move premiums from death and illness or injury cover to your additional expense needs, without having to undergo medical tests, is a powerful and unique benefit that will change the way you look at life.
By appropriately pricing cover for your short, medium, and long-term needs, we’re able to save you an average of 30 per cent on your premiums. That’s change you can love, as you learn to Love
Change – whatever life holds in store!
* To find out more, call your financial adviser, or visit www.brightrock.co.za.
IMAGE GOES HERE
There’s more to life insurance than insuring your life. Income protection is a crucial area of need, and with BrightRock, you can choose to cover that need in the way that suits you best.
Life insurance exists to protect people against the financial fall-out of life’s changes across a range of financial needs and insurable events.
At their core, your financial needs fall into two distinct categories: asset protection needs and income protection needs.
And often, because of inflexible product structures and affordability concerns, you are forced to choose between protecting either the one set of needs or the other.
In addition to securing assets you wn and debts you owe – typically through lump-sum capital disability and death cover – you also need to provide for a range of recurring expenses linked directly to your monthly earnings in the vent of illness, injury, or death.
These regular monthly expenses may range from the monthly costs of medical aid contributions and school fees to transport costs, groceries and cellphone bills.Income protection products provide regular monthly pay-outs to cover these recurring needs, although you are also able to cover these through a lump-sum.
Experts suggest that, if you have to choose between the two, an income replacement policy, while less popular and often pricier, is generally the wiser choice. This is because of the risk you face of outliving a lump-sum. Another reason for their popularity is the tax efficiency of income products, given that your premiums are tax deductible.
Covering your changing needs
Yet it’s important to bear in mind that the pay-outs are taxed. And there are some other pitfalls that you need to consider when selecting an income protection product.
Some recurring needs are lifelong needs while others may fall away in time.
The need to cover basic household expenses and healthcare costs exists for life; however, the monthly costs associated with raising and educating your children falls away once they’ve achieved financial independence.
Traditionally, income replacement products provide cover only until retirement age. Some of the newer products in the market allow for limited post-retirement cover as well – but because of the limits that apply, your cover may be severely watered down in retirement.
In our view, a good income protection product should offer you the ability to secure appropriate pay-outs post-retirement for lifelong recurring needs (like healthcare and household expenses).
How cover grows over time is just as important.
The monthly expenses you’re covering may grow at different rates over time. Household expenses increase in line with consumer inflation, but education and healthcare costs typically grow at a higher rate.
Simply growing your cover by inflation may lead to significant underinsurance for those two needs.
To ensure efficiency and relevance of cover, the ability separately to structure the cover for each of these needs by taking into account their duration and growth over time is a central concern.
This not only ensures your cover is adequate, but that it’s also more cost-efficient because it can be priced appropriately from the outset.
When it comes to claims, many products protecting your income in case of injury or illness are based either on occupation definitions or medical definitions. Both of these are associated with certain risks. Occupation-based criteria are sometimes so narrow that a person with a severe medical condition may still be deemed able to work.
On the other hand, the application of strict medical definitions won’t necessarily make provision for the case where someone who has a fairly mild medical condition may be significantly hindered in their ability to perform their occupation.
It is important that you enjoy the benefits of both worlds with the application of objective medical criteria and an occupation-based underpin.
Cover continuation is an important issue too.
Typically, while your insurance needs may change or move over time, this doesn’t mean they simply disappear; or that new needs won’t arise.
The ability to buy up more cover when you need it, is key. Above all, we think it’s important to bear in mind that the nature of your financial needs may differ at claim-stage depending on your financial circumstances and condition at the time of the claim.
Yet current product structures require you to choose between capital disability and income protection when you’re buying the policy, and have no way of knowing which choice may prove the most appropriate at claim-stage.
The ability to change between a lump-sum or recurring pay-out, or a combination of these at claim – a feature currently offered by BrightRock – places you in a position to tailor their pay-out to the need at the time when you’ve got all the information you need to make the correct decision.
Importantly, BrightRock’s tax efficient product structure ensures lump-sum pay-outs aren’t taxed, even when taken as a regular monthly pay-out.
We created BrightRock’s product with these issues in mind so you can arrive at a needs-matched solution that takes account of your different needs across both your income and asset protection needs.