Financial Planners & Short-term Insurance Survey reveals new Insights

By: Frans Nel, MD Value-add, EMEA 

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Certified Financial Planners (CFP’s) view Short-term Insurance as a valuable addition in order to provide a holistic financial plan for their clients, and to provide an annuity income to their practice.

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This is according to a recent survey conducted on LinkedIn with over 1800 certified financial planners, advisors, independent and tied brokers and intermediaries throughout South Africa.

The survey uncovered interesting perspectives and views – both positive and negative. We have known for some time that long-term financial planners have been under increasing pressure to do away with the elephant in the room – up-front commissions.

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The challenge for most CFP’s has been to switch from up-front commissions to as-and-when, with few having managed to do this. However, the annuity income that short-term insurance provides is an attractive option for many financial planners, with many opting to include short-term insurance in their practice.

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The CFP either gets accreditation to sell short-term themselves, or they have an arrangement with another short-term intermediary that includes remuneration.

54% of those surveyed fell into this category and where receiving an income from their short-term leads. 34% cited the benefit of having a holistic offering that included shortterm insurance, as a means of ringfencing their clients. 5% responded that short-term was a great dooropener as the sale was considered ‘easier’ than life insurance. Almost 10% saw the annuity income that short-term insurance provided their practice as being their major driver, saying they enjoyed the ‘passive income’. Only 1% saw value in the fact that there is no claw-back on commissions for short-term insurance.

46% of the respondents either had no formal arrangement i.e. they told their clients they do not do short-term insurance (17%) – mostly tied agents, or they had a loose arrangement that did not include remuneration (29%). 30% of respondents that hadn’t included short-term into their practice, provided specific reasons for their decision. Shortterm insurance was seen as being an administrative burden on the business, and 15% said they wouldn’t think of including it in their practice for that reason.

It wasn’t only the administration that was seen as being problematic, 7% said that it was an area best left to experts in their field. A massive 32% said they would rather stick to their field of speciality – life and investments – than dabble with shortterm insurance. 6% of respondents felt the negative effects of the service levels from a short-term provider could jeopardise their business, with a further 6% claiming that lack of loyalty in short-term insurance could negatively impact their practice.

(The survey was conducted anonymously over a three month period on LinkedIn, surveying 1885 South African financial services intermediaries and providers.

While the survey experienced an unprecedented response rate of 28% and over 60% of respondents providing free-text comments, short-term insurance is a topic most Certified Financial Intermediaries in South Africa still grapple with today.)

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