January 2007

When it comes to selecting who to go with for credit life cover, the choice is yours and you have the right to shop around for the cheapest quote for the most appropriate cover. This is a reminder from Lenerd Louw, CEO of South Africa’s first direct life insurer, 1Lifedirect.

“Many finance providers give clients very little choice in terms of selecting an insurer, with some going as far as forcing clients to take out a credit life policy with their own in-house insurance division.

“However, in terms of the new National Credit Act, as well as the Long Term and Short Term Insurance Acts, finance providers are not allowed to dictate to their clients who they should purchase insurance from when applying for loans or credit. Consumers have the right to shop around and choose an insurer that best fits their needs and budget,” says Louw.

Louw believes that the National Credit Act, which came into effect in June this year, has helped create greater awareness of the rights of the consumer.

The National Credit Act aims to create a fair and non-discriminatory credit market and ensure that credit providers lend in a responsible manner. It also aims to educate and help consumers make more informed choices and through this has led to a stronger awareness of consumer rights.

The Act prevents credit providers demanding that consumers purchase insurance that is unreasonable or at costs that are unaffordable to them. Consumers will also have to be made aware of all the costs involved in their intended credit agreement, so even hidden fees and commissions have to be fully disclosed. This transparency is certainly in the best interests of the consumer.

“The high level of transparency will also put brokers who have been charging disproportionate fees and commissions under the spotlight. Already, investigations into the commission practices of a well known credit life insurance provider are underway,” says Louw, adding that some brokers have been collecting around 22.5 percent commission per month on the life insurance policies they sell, some even as high as 50 percent.”

He continues: “Over a period of 20 years, a policyholder will fork out thousands of Rands for commission and admin costs, which usually escalate each year along with the monthly premiums. Many people just cannot afford to lose this amount of money.”

Louw provides the following example: “If a consumer has a credit life policy and pays a premium of R300 a month for a 20 year term, the broker commission would be approximately R16 200. This amount usually goes directly into the broker’s pocket.”

Louw advises consumers looking to purchase credit life cover or whole life cover to do their homework before settling on any particular policy from any particular insurer. This must include getting comparative quotes and comparing the level of cover the offered.

Consumers must also insist that the insurer illustrates the costs included in the monthly premiums as well as explain the fees charged for over and above that. They should also request details on commission percentages and a proposed estimate of the commission amount to be paid, at least for the first two to five years of the policy.

“Ultimately, consumers need to make sure that they are thoroughly informed before signing on the dotted line. They must also remember that finance providers are not allowed to bully them into choosing any particular insurer. It is their right to choose,” adds Louw.

He concludes saying that 1Lifedirect offers pure life insurance and credit life insurance and does not charge any commission. By going direct, and cutting out brokerage commissions and fees, clients can expect to save up to 22 percent on their monthly premiums, putting money back into their own pockets.

ISSUED ON BEHALF OF 1LIFEDIRECT BY THE MAIL ROOM. FOR MORE INFORMATION PLEASE CONTACT JOLENE CHAIT ON 084 433 9198 OR E-MAIL Jolene@themailroom.co.za

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