2020 – the start of a new decade and time for a sharper way of thinking. Top of the agenda for us at FMI (a Division of Bidvest Life Ltd) going into 2020 is to address the alarming number of young professionals currently uninsured in the South African market.
The need for Income Protection is at its most critical when individuals are just starting their careers and their future earning potential is at its highest. These individuals are at the stage in life where they’re at their most vulnerable. The average 30-year-old, for example, has a 95% chance of a temporary injury or illness that will stop them from working for more than 2 weeks during their working career1.
The gap is closing
ASISA’s latest 2019 Gap Study indicates that income earners under the age of 30 make up the largest insurance gap in the market with only 38% of the Disability cover they need in place, but it’s still an improvement from the 2016 Gap Study results of 35% of the Disability cover in place. The dial is shifting – slowly – and the work that needs to be done to help educate this segment of the market in the benefits of Income Protection is only just beginning.
Early Earners generally don't consider life insurance to be a priority. "I'm too young for life cover", "I can't afford it" and "I have no dependants" are just a few of the reasons why young earners believe they don't need life insurance insurance. The poor misconception is that life insurance is only about covering death and permanent disability. According to FMI's 2018 #RealityCheck Consumer Survey, 48% of South africans think that life insurance is death cover only. They view it as unnecessary at this stage in their lives because they don't understand that even if they don't need life cover, protecting their monthly income against the risk of an injury or illness is vital to ensure they're able to continue earning and building their savings up too.
Unfortunately, these risks are often overlooked, and insuring themselves accordingly isn't even on a young earner's radar. That is why financial advisers play such an important role in closing this insurance gap, by opening the eyes of young South Africans to the importance of protecting their income from the first day they start working.
How FMI is making strides in closing the gap
With its sights set firmly on reaching this (largely) uninsured market, FMI’s Income Protection provides a range of unique benefits that’ll assist advisers connect with these young earners.
Affordability – Early Earners assume they can’t afford insurance, but Income Protection is surprisingly affordable, especially within this age group. Young customers are quick to spend over R250 a month just on morning cappuccinos. FMI is making the affordability factor real to them by demonstrating that, for the same cost, they can insure 100% of their income against the risk of an injury or illness2.
Adaptability - FMI’s Future Income Protector (FIP) allows your clients to increase or change their cover without medical underwriting, by up to 300% of the cover amount in place when the policy commences. This means that a young earner can protect themselves against injury or illness now, and only take out Life cover when they need it. They can also adapt their cover amount as their income increases or their needs change, without further medical underwriting - even if their health changes.
Longevity - With medical advances, improving nutrition and education, longevity continues to increase. As an industry, we need to keep up with this trend and plan for more people working past the age of 65. That’s why FMI offers Income Protection up to the age of 75 – protecting your clients’ last few critical income-earning years.
Ways to secure a client for life
Product offerings and the whole decision-making process can feel quite intimidating and complicated to the Early Earner segment of the market. With this type of conversation, the first step, as an adviser, is to make a human connection. Only then, once you understand who they are and where they’re going, can you understand their financial needs well enough to provide a strong solution that works for them.
Talking Income First helps you do just that – it’s easy to understand and easy for your clients to relate to. In a recent qualitative research session, FMI found that most young people want someone to explain the ins-and-outs and cut through the technical jargon. They may have a mistrust of insurers, but they typically accept financial advisers as experts, and would prefer a one-on-one conversation over attempting to navigate this important decision online alone. This is contrary to popular believe that young people would rather go the tech route than engage face-to-face, and presents a welcome opportunity for advisers.
By connecting with young customers early on and assisting them through the complex process of insurance and risk planning with the right advice, you can grow your clients as their needs evolve.
The future of Income Protection
The industry still has a long way to go in adequately catering to this market and their specific needs. The challenge for insurers is to offer a product that meets the needs of this changing workforce.
According to Brian Rashid on Forbes.com, it is predicted that, by 2020, half the US workforce will consist of independent workers. And this does not mean they will all be full-time freelancers, but one of every two workers will be freelancers in some capacity. As Rashid points out, “Who says you can’t drive an Uber in the morning, design websites all afternoon, and cater your own food company at night?”
Once seen as the distant future, 2020 is upon us! We need to offer quality Income Protection to all of these individuals, or whether they’re salaried or an independent worker, or if they have one source of income or multiple sources.
Early Earners are driving the freelance growth we are starting to see, not just worldwide, but in the South African market too. Stats SA's employment outlook reported that temporary employment rose from 2.6 million in 2017 to 3.9 million in 2018.
FMI continues to innovate in this field and has exciting plans set to pave the way for the market, as part of their vision to enable all income earners to protect their income, no matter what they do for a living.
As an adviser, you may think the typical Early Earner is a challenging market to crack, but it offers the greatest opportunity for growth. It’s simply a matter of shifting conversations from death cover, to living insurance – from life cover and lump sum benefits, to Income Protection with FMI, the Income First way.
*FMI defines Early Earners as individuals just starting out in their career, with no dependants.
1FMI Risk Stats 2019. Risk stats calculated on probability for 30-year-old female non-smoker before retirement age of 70.
2FMI Quote Calculator based on a 30-year-old female non-smoker earning R30 000 a month, protecting 100% of their monthly income. Premium cost calculated at R24 a day.