No stranger to innovation and never afraid to test uncharted waters, First National Bank (FNB) is now rattling the cage of the life insurance industry.
The bank has launched wholesale online life cover direct to its customers for up to 50% cheaper than market related equivalent products.
The offering includes life, disability, critical illness and retrenchment cover, with no pre-exclusions on death on life cover.
Critical illness cover includes heart attack, stroke, cancer, and open heart surgery, among other conditions.
"Life cover and its related offerings are one of the highest priorities in the minds of South African parents. We need only look at the enormous popularity of stokvels offering funeral cover to see how important this is. The fact that there is such a wide insurance gap only indicates that affordability excludes large numbers. By offering cover at wholesale prices, I believe we can bring about a wide-spread improvement in the financial stability of families," FNB CEO Michael Jordaan said at the launch on Wednesday.
On average, South Africans spend 4% of their after tax income on life insurance, equating to approximately R4.4 billion per annum. "We are able to strip out the unnecessary costs resulting in up to 50% less on life cover premiums, potentially saving South African consumers up to R2 billion in premiums per annum," said Jordaan.
"To ensure that our customers are getting the best possible value for money, we have stripped out all unnecessary distribution costs, such as advertising and broker fees, enabling us to pass the saving on to our customers," added Johan Nagel, CEO of FNB Insurance.
Asked whether FNB was changing its line of business, Jordaan responded: "Our primary business remains banking, but we also want to enrich our clients. We want to give wholesale insurance direct to the public. It's a value add product.
"We're not trying to make money out of this. It's just another reason for people to bank with FNB, But obviously we have to cover our costs.
Any FNB client who is a South African citizen, between 18 and 60, who holds an FNB credit, cheque or home loan account, may qualify for the FNB Life Cover policy. FNB has done away with the need to complete application forms. Instead customer will only need to complete a telephonic application and answer a few medical questions, to be accepted for cover. Applications are approved within 24 hours.
"This process allows us to give customers a premium that is as affordable as possible and, it protects them from unfairly subsidising people with higher risk profiles," said Nagel.
"Our integrated system means that we have access to our customer's profiles, simplifying the process and ensuring that customers do not have to transfer funds from one place to another in times of payment," he added.
Life cover is seen as a national priority, with only 3.8 million out of a potential 12.4 million South African income earners currently insured for life cover - and some 62% of those insured are under-insured.
"We have done our best to address this need and add value to our customers, creating a product that is simple, hassle-free and affordable," Nagel concluded.
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