Direct life insurance isn’t necessarily cheaper than traditional insurers
DISCOVERY Life told yesterday that direct life insurers were not as cheap as they said consumers. In a presentation in Sandton, Kenny Rabson as the deputy CEO of Discovery Life explained that based on the study, the average initial premiums of direct life insurers were 9% more expensive than traditional insurers.
He added that to attract and retain clients, the business model of direct insurers forced them add “load” operating costs such as commissions for call-centre agents and big marketing budgets. He also said that it compared with the traditional players that still dominated the market; the direct life insurance sector was still small.
“But the study’s findings stated that consumers weren’t be aware of the limitations of buying life insurance via a call- centre agent or the internet”, said Mr. Rabson . He told that this study’s findings were based on benefit information for three males aged 31, 43 and 51 and case studies which were using comparative quotes.
The findings had been representative of current trends even though the details of the individuals were based on “fictitious information”. “According to one of the study’s main findings, using intermediaries such as brokers did not increase the cost of premiums because brokers were able to explain the complex details involved when buying life or disability cover “, said Mr. Rabson.
Laurence Hilman said that using the intermediary brokers was more suitable for high net-worth clients who usually wanted advice on such issues as estate planning. He also said that the direct model could be accessible and affordable to the broader market and it was an easy option for people to take life insurance.
