I recently received a marketing offer from 1lifedirect to take out some life cover directly through them, thereby cutting out the paperwork, expensive medicals, the broker and therefore the commission. All of this, they promised, would save me up to 22% on the premiums.
Having seen their rather funny TV adverts and being the curious sort I decided to give them a call to see if things were as good as they promised. After all, their flyer offered me R500000 life cover for only R140 per month (subject to certain terms and conditions of course).
On the face it of their offer sounds quite attractive – but on further investigation it is anything but so. Some comparative quotes to see what I could get elsewhere revealed that I could get R896000 life cover for R128 per month (with full commission on the policy). The same cover without any commission on the policy would cost just R100 per month – now that is a saving of 28% on the full commission quote and is over 50% less than the 1lifedirect quote. So there really is no saving of anything and in fact, sometimes cutting out the middleman could turn out to be quite a bit more expensive.
The 1lifedirect offer is not nearly as good as it initially seemed and far from it being a quick and convenient process they could not give me a quote over the phone because of the fact that I do the occasional scuba dive. The quote needed to be done by their actuaries…7 working days later and still no quote from them despite 2 follow up phone calls from me. By this stage, the average insurance broker would have had the case finalized and issued and I don’t even have a quote. Sometimes going direct is certainly not a quicker or more convenient process.
1lifedirect also say that they cut out the need for expensive medicals – for the record, most medicals are paid for by the insurance company concerned. This is certainly the case where the insurance company is the one that calls for the medicals. Sometimes going direct can mean that you stay ignorant of the facts.
1lifedirect also claim that they cut out the need for paperwork. Far from this being a pro it could turn out to be a real negative the next time you apply for insurance cover; no paper work means that you have no record of what you answered on the medical questions and no record of answers significantly increases the risk of accidental non-disclosure. As a consequence this significantly increases the risk of a claim being repudiated by the insurance company (because of the accidental non-disclosure).
So, far from being “life insurance that is quick and convenient, and that – by cutting out the broker – saves you money!” in my case, the offer by 1lifedirect turns out to be significantly more expensive, not so quick and also potentially increases the risks when applying for future insurance.
For the record, I have no problem with people going direct. To me it is much like fixing the toilet at home – I can do it but it will take time and effort and I might not have the necessary tools. Either I invest the time and energy or I pay a plumber to do it for me.
In the same way, if a broker can’t add value to the client and he/she knows what they want and has the time to do it then there is no reason that they should not go direct. They just need to be aware that it may not always be the best option and that while in some cases it may appear to be cheaper it could turn out to be a very costly exercise.
Sometimes cutting out the middle man just leaves a gaping hole.
That’s all for now.