Can someone explain to me why funeral insurance is so expensive? It has got to be one of the biggest rip-offs and forms of institutionalised abuse of South Africans. I did some shopping around online and could find the following quotes for R20000 funeral cover:
Simply – R81pm (but you also have to buy other forms of cover so the minimum premium is closer to R150 pm and includes R50k life cover). Hollard – R104pm, Dotsure – R73pm, Burial Assist – R100, Budget – R102, First for Women – R104, 1lifedirect – R123
Now compare the cost of a funeral policy to a properly underwritten life policy. Using the same information that I used to get the funeral policy quotes, I was able to get a quote for R300000 life cover (which includes funeral cover pay-out of R40k) for under R100pm.
It is clearly very lucrative cover as there are at least 30 providers in SA that I could find…and the vast majority of South Africans are being seriously ripped off by the funeral insurance industry – it is time that the Financial Services Board looked into this…
I recently tried to make an appointment to see my doctor for my annual check-up only to be informed that he has left to “take a sabbatical”. Bottom line is that he is tired and has had enough and is going to do something else.
I’m disappointed, but I guess I’ll just find another doctor. It will take a bit of time, I’ll ask around for some recommendations and will probably go and see one or two before making my choice. Just the same as I would do if my accountant, dentist, lawyer or any other professional retired/died/left the business. That’s the way it works…
So, what’s the FSB’s obsession with succession planning in the financial services industry? Why the need for a succession plan (as part of legislation)* which just adds to the cost of running a business and ultimately increases the cost of advice to clients?
If I leave/retire/die my clients can find a new financial planner. There is no financial risk to the clients and they won’t lose any money – they’ll just need to find another financial planner. That’s the way it works in any profession, except ours…but I guess we’re not yet a profession as much as we like to pretend that selling products is financial planning.
*a succession plan is good business practice, but to force it as part of legislation seems crazy to me.
I just came across a client who has been sold a decreasing life annuity by someone representing Liberty Life. Yes, I know that there is no such thing (officially) as a decreasing life annuity (no one would buy it if there was) but this is effectively what a non-escalating life annuity is. You have condemned the client to future poverty!
While the initial income may look more attractive, in 20 years time (the guarantee period on the annuity for a 65 year old with stage 3 cancer and no financial dependents?) she will be getting an income which will be less than 1/2 of what she should be getting if there was an inflation linked escalation.
This is the kind of product and advice that gives our industry a bad name. If the insurance companies and ASISA wont act then perhaps it is time that the regulators banned this kind of product.