How is Life Insurance Sold?

It is inevitable. When you think about how life insurance is marketed, you probably cannot help but recall images of evocative TV advertisements that inevitably feature some cute toddlers, the aged and jingles like “…he ain’t heavy, he’s my brother…”, and lest we forget, a variety of adverts in newspapers and magazines sporting corny slogans like “Cash if you die. Cash if you don’t.”

Although these direct marketing campaigns may succeed in making you aware of your responsibilities, chances are slim that you will be inspired to call the boldly printed toll free number that either appears at the bottom of the TV screen or somewhere on the printed ad.

The main reason for this is that life insurance is not a typical As-Seen-On-TV impulse purchase. Instead, it is a rational purchase – something that can only be sold if a need exists. And even then, most of us would want to inform ourselves that the life insurance product we eventually end up buying, is the best match to our personal circumstances.

The insurance companies are – their rather costly marketing campaigns in spite – fully aware of this fact. This is why they make extensive use of intermediaries to undertake the selling on their behalf.

These intermediaries are either agents or brokers.

Agents

Life insurance agents are permanently employed by a specific insurance company, who provide them with compulsory training, offices in their buildings and full administrative support. A part of their income is made up of a salary and the remainder from commissions.

The role of agent

Life insurance agents take responsibility for the following:

  • Taking instructions from you
  • Performing a needs analysis
  • Selecting a product
  • Submitting paperwork
  • Monitoring progress until policy issue

After issuing the policy, the insurance company help desk will normally be invoked. The help desk will:

  • Make changes to your policy as and when required
  • Deal with any queries you may have
  • Assist with claims

Brokers

Unlike agents, brokers simultaneously hold agency contracts with a variety of different life insurance companies and earn their income solely from commissions. They are also responsible for their own offices and their own administrative support.

Irrespective of whether a broker is a one-person -, online-, banking-, multinational- or international concern, they are considered under South African Law as professional insurance practitioners and held legally liable for the advice offered to their clients. Product training is compulsory, and they are required to periodically sit exams to retain their agency contracts with the different life insurance companies.

You will find that most reputable brokers belong to one or more insurance association. These include:

  • LOA (Life Offices Association)
  • SAFSIA (South African Financial Intermediaries Association)
  • BC (Independent Brokers Council)
  • LUASA (Association of Professional Financial Advisors)
  • IISA (Insurance Institute of South Africa)

The role of an insurance broker

Brokers take responsibility for the following:

  • Taking instructions from you
  • Performing a needs analysis
  • Selecting an insurer
  • Selecting a product
  • Submitting paperwork
  • Monitoring progress until policy issue
  • Maintaining and providing a schedule of all your insurance policies, values, etc.
  • Making changes and updates to your policy or policies for as long as these remain in force
  • Dealing with queries for the term of the policy
  • Assisting with claims

Agent or Broker?

Whether an agent or a broker is best suited to you, is a matter of personal preference.

Agents are useful if you maintain your own insurance schedules, remain on top of what is happening in the insurance industry from a product perspective and don’t mind dealing with a help desk after your policy has been issued.

Brokers, on the other hand, are advisable if you would rather have a single point of contact into all the different insurers, somebody specific to take care of all your requests and queries and a personal service that will span the lifetime of your policies.

Regardless of whether you elect to purchase your policy through a broker or an agent, the most important thing – as will all things financial – is ensuring that the person you end up dealing with has an unblemished track record and a good reputation. If you have any doubts, you can contact the LOA or LUASA to check his or her credentials.