Those in need of insurance have several options available. In the early years of insurance, clients had to approach a broker to assist in acquiring the needed cover. Then came the telephone marketers approaching potential clients and now clients can purchase insurance directly from insurance companies by going online!
The growth in the online industry and advances in technology available have contributed to a significant increase of online insurance purchases. This was initially focused on short term insurance policies such as car and household insurance. Several insurers are now benefitting from the levels of service excellence and customer satisfaction and are making life insurance available online as well!
What Is Direct Life Insurance?
Direct life insurance is, as its name suggests, life insurance you can buy direct, either from insurance companies or financial institutions. There is no involvement by a financial planner, the cover is easy to apply for, requiring nil or minimal medical information and applications can be completed online or over the phone.
This now includes not only Life Insurance but also add other benefits such as Total and Permanent Disablement, Trauma and Income Protection.
Who are most likely to purchase direct life insurance?
Direct life insurance policies are designed especially for people who really should have life insurance but can’t be bothered with the whole financial planner process, needs analysis etc. These products appeal to people who know what they want and like the idea of having a straight forward life insurance policy in place to protect their family and assets, should the worst happen unexpectedly.
As an example, a new home buyer may decide to buy life insurance to protect the asset and ensure his family doesn’t suffer financially, should the worst happen. As such, direct life insurance fills a useful niche which is becoming increasingly more obvious as its popularity continues to grow.
Direct life insurance is also a good quick-fix for someone who wants to put a policy into place straight away but plans to review their complete asset protection and investment strategy with a licensed financial planner a bit later on.
Benefits of purchasing life insurance direct
We would like to share a few of the benefits of direct life insurance:
- Products are simple and easy to understand by the target market.
- It’s much simpler to apply for this type of policy
- Download the application form from the internet, or apply on the phone or at your bank or insurance company branch
- Direct life insurance are known to be well-packaged products
- The questions are easy and in plain language
- Minimal medical to no medical information required
- Fast answer – you know straight away if your application has been successful
- Immediate death cover – you are covered straight away, upon acceptance of your application
- The process eliminates unnecessary costs and broker fees normally added to insurance premiums
- There is no need for accompanying financial advice due to the simplicity of the product offered which services basic needs.
Challenges to direct life insurance industry
What are the challenges facing the insurance companies offering life insurance directly / online?
- The older generation is still more comfortable dealing with a broker whilst the young are very comfortable in shifting online purchases towards their insurance needs as well!
- Life insurance is not regarded as a typical As-Seen-On-TV impulse purchase. Instead, it is a rational purchase – something that can only be sold if a need exists.
- Many in need of life insurance wants to be informed and assured that the life insurance product they eventually end up buying, is the best match to their personal circumstances.
- Clients with more “complex” needs might seek to find a product that is more tailored towards their needs.
Advice to people needing life insurance
There will always be the need for highly qualified financial advisers to assist those persons who have complicated financial affairs, or who are for any other reason requiring personal financial advice, a financial needs analysis etc
It is also expected that there will be strong growth in the direct life insurance industry. As consumers enjoy increased satisfaction with the online purchasing experience, many more will manage their financial needs online.
We would like to provide the following advice to those clients purchasing file insurance online:
- Check that your life insurer is registered with the Financial Services Board.
- Registered life insurers are bound to comply with the financial legislation such as Policyholder Protection Rules aimed at protecting insurance clients.
- These direct life insurers will also be bound by the ‘Codes of Conduct’ from industry associations to ensure that we are fully up to date with industry developments.
- Look carefully at exclusions in the policy before you sign up and specifically at any definitions of pre-existing medical conditions.
- Note that some direct life insurance policies reduce the amount of cover as you age.
- Also note the restrictions on risky lifestyles such as working on an ocean oil drilling rig and motor racing in your spare time.
On Insurancechat.co.za we will provide more advice and suggestions on how to compare insurance offerings and assist readers in the process of meeting their insurance needs!
