Beware of the "Family Friend"!
By Coert Coetzee
There are plenty of so-called "family friends" who are the proverbial "wolves in sheep's clothing".
I always say at my seminars that modern life insurance products provide more cover at lower premiums than was possible 15 years ago. Sometimes there are members of the insurance industry in the audience who don't like this and demand proof. Recently, I also had someone who was very unhappy because I was generalising when I said that estates usually take longer than two years to settle. These matters are very sensitive, because if I'm right, it means that the insurance industry is not living up to their code of conduct. And of course, if I'm wrong, it means that I have my facts wrong but, I don't think so.
It's not always possible to produce statistics for every statement I make, because my statements are based on years of experience - no-one's going to keep statistics of how many times people have allegedly been swindled, and if the police don't catch the swindlers then there won't be any statistics. The crime figures for South Africa are a typical example of what I mean. According to the experts, the actual number of crime victims is far higher than the official figures indicate. Not all cases are reported to the police, and so they don't form part of the statistics. In many of these instances where the crime is not reported, it's because it occurred within the family context. In other words, the crime was committed by a family member or family friend, and to avoid "shame", everyone keeps quiet about it.
I get plenty of emails from people reporting the poor performance of insurance products to me, but they aren't prepared to report it to the relevant authorities because they don't want to get the friend who sold them the policy, and with whom they play golf, into disrepute. By the way, an endowment policy or pension plan that, for example, pays out less after fifteen years than the contributions plus inflation, is nothing but a shame, and, as far as I am concerned, must be reported to the authorities.
Some of my so-called allegations can be proven with figures though - one of these is that modern life insurance is much cheaper now than a few years ago. The table below contains information that I requested from an independent broker where the universal life products were compared to new generation products. The table is based on actual insurance policies, calculated on standard underwriting requirements.
| Age |
Gender |
Life Cover |
Disability Cover |
Serious Illness |
Old Premium |
New Premium |
Saving |
% Saving |
| 42 |
Male |
R 950,000 |
R 498,248 |
R 0 |
R 613 |
R 260 |
R 353 |
57% |
| 52 |
Male |
R 3,627,354 |
R 0 |
R 0 |
R 2,602 |
R 1,660 |
R 942 |
36% |
| 55 |
Female |
R 1,034,218 |
R 0 |
R 1,034,218 |
R 1,095 |
R 899 |
R 196 |
18% |
| 54 |
Female |
R 4,347,654 |
R 347,654 |
R 0 |
R 1,375 |
R 1,055 |
R 320 |
23% |
From the table it's clear that the premium of a new insurance policy with exactly the same cover is between 18% and 57% cheaper now than a few years ago. Few people have this information, and the insurance industry doesn't send out newsletters about it either.
If you are not a Treoc Risk client, and you want to improve your cashflow immediately, I suggest these three steps:
1. Immediately contact the financial planner who originally sold you the policy, and ask him to give you a new quote on your life insurance for exactly the same cover that you currently have. Insist that he first just gives you the quote for exactly the same cover, before any analysis is done as required by the FAIS Act. This quote will put you in a position to compare apples with apples. If the quote is done correctly, it should confirm the findings in my table, and you will have to pay a far smaller premium for the same cover.
2. The next step is to ask the financial advisor to explain the possible difference in premiums for the same cover. If it now suddenly costs you, for example, R1000 less per month for the same cover, then it means that over the last 5 years you could have paid R60, 000 too much. Find out from the financial planner what it is you need to do to claim this money back. You won't like the answer.
3. Now decide whether you're going to let the "family friend" arrange new cover for you again.
Please note that most financial advisors are honest, competent and adhere to the strict industry rules. There are many who do their work properly and regularly review and adjust their clients' policies to keep them in line with changes in cover and premiums. The quote you get will show you whether your broker is one of these people, and if so, stay with him or her. You've found a treasure!
Happy House Hunting!
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