Consumer tips when buying insurance

Maikisa Ilukena

Buying insurance can be a daunting task. Everything from selecting the right policy to choosing the right insurance company to buy the policy from can make the whole process overwhelming. Due to lack of information, some customers have ended up buying policies that they do not understand and get disappointed along the way. Others have ended up with unsolicited policies and suddenly start seeing deductions on their pay slips. Here are some tips that you can use when buying insurance to avoid pitfalls.

Understand your financial and insurance needs

Before buying insurance, it is important to understand your financial circumstances and needs – assess what may need insurance cover and do not buy on impulse. Buying insurance especially a life insurance product is a long-term commitment. Ensure that you understand the product and can afford the premiums over the term of the policy.

Shop Around

It is important that consumers take time to shop around before making a final choice as opposed to purchasing the first product that immediately comes your way. As a consumer, enquire from two or three insurance service providers and compare services before making a decision. You may also wish to use an insurance broker – it will not cost you extra and may in fact help you to get a better deal as brokers deal with various insurance companies and are therefore, able to find the insurance company that best meets your needs.

Demand for documentation

Once you have purchased an insurance product, always demand for documents that relate to the purchase. This includes copies of insurance documents you signed, receipts, Key Facts Statements about the product and policy wordings and the insurance cover note.

Data Privacy

Avoid sharing personal details before making a final decision to purchase any insurance product. As a consumer, you should avoid giving out personal details such as your phone number, NRC number and bank details. Equally, do not sign on any blank document or fill in any form unless you are sure that you want to go ahead with the purchase. This will help you not to be offered any unsolicited service (service not demanded for).

Ask Questions

As a consumer, you need to ask questions in order for you to fully understand the insurance product and make an informed decision. The Insurance company, broker or agent have an obligation to disclose all the material facts to the customer truthfully. The information provided should help the customer to understand the characteristics of the policy they are buying and help them understand whether it meets their financial needs. Information that you need to have includes the following:

  • Information relating to the type of insurance contract on offer, including the policy benefits, level of the premium, due-date and period for which the premium is payable, as well as the consequences of late or non-payment of premiums.
  • Information relating to the conditions to the cancellation of an insurance contract including the existence, duration and conditions relating to the right to cancel. Customers in this regard have to ask questions relating to their right to cancel insurance contracts as well as enquire if any, the existence of any implications and costs relating to the to the early cancellation or switching of a policy.
  • Information relating to the claims procedure. Insurance companies should clearly outline the conditions under which the policyholder can make a claim and the procedure relating to the same. Further, customers should be aware about the documents that they would need to submit when making a claim, the timeframe for making a claim as well as the time frame in which the claim will be settled.
  • Consumers have the right to ask questions relating to handling of complaints. Insurance providers should therefore, explain the complaints handling procedure to the customer at the point of purchase of the insurance product. 

Despite the above stated consumer tips and due to asymmetric information that exists between the provider and the customer of insurance products, the Authority recognises that retail customers in particular often have only limited knowledge about their legal rights and obligations arising from an insurance contract. This is why the Authority undertakes consumer awareness activities, which are aimed at among other things educating the public on insurance matters including rights and obligations of insurance policyholders.

The Authority has also made strides in ensuring that consumers are treated fairly through the introduction of Key Facts Statements, which insurers are supposed to issue to customers before they buy the product. Key Fact Statements provide prospective customers with key information relating to the insurance policy such as sum assured, premium, claims procedure and terms and conditions.

The Authority has also established a Market Conduct Unit which among other things is tasked with undertaking market conduct inspections aimed at ensuring that regulated entities are compliant with the Insurance Act as well as other consumer protection legislations.

The Market Conduct Unit is also in charge of handling consumer complaints.

In conclusion, it is also important that consumers of insurance services and products are vigilant before engaging in any insurance contract. Customers must be fully aware of the terms and conditions of the insurance contract before they purchase the insurance product. Equally, the insurance company or intermediary has an obligation to make the terms and conditions of the insurance contract clear to the customer before the purchase in concluded.

For comments or questions, send us an email at pia@102.23.123.62 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: Mobile: 0950-136662, Email: pensions@102.23.123.62

Insurance-related complaints: Mobile: 0950-136663, Email: complaints.insurance@102.23.123.62

The author is a Market Conduct Inspector in the Insurance Department at Pensions and Insurance Authority.