THERE is no worse feeling than to discover that what you bought is not what you expected.
This could be a non-functional fridge, a phone with limited functions, a savings account that is expensive to maintain through fees, or an insurance policy that does not meet your expectations or fails to deliver at the point of making a claim.
In the case of insurance, customers can lose confidence in the entire range of insurance products when they go through an unpleasant experience with an insurer. It is therefore cardinal that insurers give customers an experience that should make them see the value for money in what they buy and subsequently go back for renewal.
Some of the complaints that are received by the Pensions and Insurance Authority (PIA) and support partners such as Consumer and Competition Protection Commission range from genuine complaints of unfair treatment of customers, policyholders not being aware of the scope of the insurance cover, to failure to read the ‘fine print’ or ‘jargon’ at the back of the cover notes.
Further, there are also disputes on claim payouts due to non-availability of policy wordings that would have spelt out terms and conditions.
Unnecessary delays in getting a claim settled is also another frustration faced by some policyholders.
As insurance is an intangible product or a promise that can only be felt when a future event occurs, customers feel cheated if they cannot claim or it is found that certain events or perils were actually not covered.
This is partly because people do not read or ask what the insurance policy covers. However, insurers themselves do not equally explain clearly what is covered and what is not covered by the policy.
This will no longer be the case when Key Facts Statements (KFSs) are introduced for insurance consumers next month.
KFSs are part of disclosure requirements that should assist in clarifying terms and conditions of insurance policies.
Further, they may also assist in improving financial literacy among Zambians and help people make better choices when purchasing insurance.
It will become mandatory for all insurance companies offering motor insurance, household or contents insurance, home owners insurance, funeral and life insurance policies to give KFSs to customers.
KFSs have been used by the United Kingdom’s Financial Conducts Authority, South Africa’s Financial Sector Authority, Malaysia, Australia and various other jurisdictions.
The main drive for this has been fundamentally consumer protection and ‘Treating Customers Fairly’ (TCF) principles.
The KFSs are not meant to replace policy wording documents, which are part of the insurance contract.
A consumer will have the right to demand for a KFS and ask questions before they purchase any of the above-highlighted policies.
Correspondingly, the consumer has an obligation to sign a copy of the KFS to indicate that they have understood what they are buying.
The role of KFS, as the name suggests, is to give a potential customer a feel of what to expect before deciding to buy a particular insurance product.
A sales representative should take the client through the KFS prior to a sale.
Essentially, the same KFS should be used by the customer for future reference after a sale. Some of the advantages of rolling out KFSs to the insurance industry are to:
• Demystify the type of insurance product one is buying;
• Create a transparent way of doing business between customers and service providers;
• Assist a buyer to compare services offered by one insurer to another;
• Help policyholders know their rights and obligations before they buy the product;
• Improve service delivery as the insurer is dealing with well-informed clients;
• Reduce reputational risk of the insurers and industry through the minimisation of complaints; and
• Increase insurance uptake through increased confidence in products
In conclusion, in order to promote financial inclusion and penetration as supported by the National Financial Inclusion Strategy of 2017 -2022, KFSs should be supported by all stakeholders involved.
A better bargaining position for the buyer increases sales volumes for the seller through enhanced confidence of services and ultimately should help to develop the insurance market.
For comments, questions or clarifications, send us an email at firstname.lastname@example.org or follow us on our Facebook page, Pensions and Insurance Authority.
You can also call us on 211-251 401/5 or 0977-335809 or 0965-255136.
For Complaints, kindly use the following details:
Pensions-related complaints: 0950-136662, Email: email@example.com
Insurance-related complaints: 0950-136663, Email: firstname.lastname@example.org
The author is an inspector in the Insurance Market Conduct Unit at the Pensions and Insurance Authority.