Going direct is actually 9% more expensive
One of the biggest considerations for consumers when choosing an insurance provider is first the matter of cost and second whether they should contact a broker or go direct.
However, according to the results of a recent study conducted by Discovery Life, going direct is actually 9% more expensive than engaging the services of an intermediary.
Justus van Pletzen (Pictured right), CEO at the Financial Intermediaries Association of Southern Africa (FIA), says the study shows that not only can one save money, but those who make use of financial intermediaries are more likely to be better financially informed.
"Consumers can often get lost in the jargon and red-tape found in insurance policies. Intermediaries are there to help clients understand their own responsibilities and can explain the terms and conditions set out in the policy to ensure that in the event of a claim, it will be processed quickly and properly," says van Pletzen.
He says the insurance needs of consumers also differ over time according to changes in their lifestyle.
"Consumers can often find themselves underinsured because their policies were not updated accordingly. A professional intermediary actively reviews their client's cover and ensures that they are adequately protected at all times."
With this in mind it is essential that consumers ensure they are using the services of an accredited and reputable financial adviser. Van Pletzen provides some key tips that consumers should bear in mind when choosing an intermediary:
Does your intermediary hold a FAIS licence?
All financial advisers must display a copy of their FAIS licence at their office. It is important to ask to see a copy of their licence and make sure that the adviser is licensed to sell the products they are advising on.
Does your intermediary belong to a professional body?
Intermediaries who belong to professional financial organisations, such as the FIA, are reputable, more informed and therefore in a better position to provide professional advice.
Furthermore, affiliation with a professional financial body means the intermediary will be kept up-to-date with regulatory and legislative changes, industry developments as well as having access to vital training opportunities.
Make sure a Financial Needs Analysis (FNA) is performed
An intermediary should perform a FNA to determine their client's financial needs and their risk profile. The most common reason for claim rejections is often due to the fact that the client's needs have not been fully understood, so it is vital to ensure the intermediary is well informed.
Find out about other product options
When looking for a new product provider, it is important to ask for a second or third option and not to simply accept the first product being offered.
What fees or charges will you be paying?
Clients must understand what fees are charged by the product supplier. Fees are often difficult to understand and may not be easily spotted in the policy. An intermediary can explain the fees or costs involved. Some products may not have fees but they may charge costs.
Does the intermediary have professional indemnity cover?
As from Sept 2009 Professional Indemnity is mandatory in financial advisors disclosure documents, intermediaries are required to tell their clients whether or not they have professional cover in terms of the Policyholder Protection Rules (PPR).
Using an intermediary who has this cover is critical as it provides protection to the client in the event of the intermediary being found negligent.
"The benefits of an intermediary cannot be understated. By keeping these important tips in mind, consumers can find a qualified financial adviser to assist them in making crucial financial decisions best suited to their individual needs," concludes van Pletzen.