My father rolled his eyes to the heavens and sighed…
The day I announced to my family that I was going to sell insurance, my dad shook his head sadly. ‘You are going to embarrass this family‘, he stated. I guess I understand where he is coming from – almost everyone I know has had a fight with their insurance company.
The geyser breaks and falls through the ceiling and shatters your great-great-grandmother’s ebony dining room table. Your son borrows your car on the first night of his first university holiday break and wraps it around a tree. Whilst you are out at the movies (the first real date you’ve had with your partner in months) your house gets burgled and the thieves make off with the contents of your freezer and a hefty clutch of gold jewelry. Your ex-fiancé sneaks into your house with the extra set of keys you forgot to take back, cuts up all your Armani suits and sets fire to your new partner’s Pokémon collection. You know? The everyday episodes of your personal reality show As the World Turns and Burns.
So you take a deep breath, fish out the relevant documents, crack your knuckles and… Make. That. Call…
All our operators are currently busy. Please hold. Your call is important to us…
After holding for what seems like a lifetime and explaining your story to three different agents you are put through to the ‘right’ department. You congratulate yourself, because, this time, you had remembered to write down the agent’s name that sold you the product. You have stood your ground, and insisted to speak to Paul.
Only Paul has left the building. Last month he packed up his electronic photo frame with pictures of his recent holiday in Istanbul, gave his pot plant and extra sticky notes to the secretary and moved on to greener pastures at a rival firm.
Lucky for you, Sindiswa has taken his place! She seems kind, reassuring and patient…
How the Insurance Industry (actually) works
The Insurance Industry relies on selling insurance policies via salespersons, who receive a commission for their efforts. Fair enough, you say. They must eat (or, in Paul’s case, go to Istanbul). There was a time, agents will point out, when the commission was asked for upfront and cost a lot more.
Luckily for you, dear client, they have your best interest at heart! Times are tough! By adding an extra fee to your monthly premiums, they will recover the cost of the commission over the lifespan of the policy. Let us say you, the client, wants a policy which costs R557.00 per month. Over 13 months the commission paid to the broker will be R3 126.94.
Should you wade through the T’s and C’s and legalese in the impossibly fine print you ‘quickly’ needed to initial, you will find the sentence which confirms the commission amount. Since you are not paying the commission upfront, the insurance agency extends this to you in the form of a ‘loan’… to which they add interest.
But wait! There is more!
Did you know that the higher the premium, the higher the commission will be, as it is worked out on a percentage basis? Do you see the conflict of interest in this transaction?
Paul, the confident, polite and knowledgeable agent that he was, had really been motivated to sell you greater coverage, because he wanted to earn a higher commission. However, having earned that commission, he has moved on.
The kind, reassuring and patient Sindiswa now needs to take over. She cannot make any money unless she sells you a new product. She may ask you to end your current policy. There could be penalties. The “better” plan would provide her with income.
Straight up advice – a fresh approach
We all know that nothing in this world comes for free. But we don’t want to see it. Sales persons take advantage of the fact that people are more likely to spend extra money over time, as long as it doesn’t eat into their pockets in the here and now.
At Northwood Financial Services (NFS), we help people to become wiser. We sell financial advice. The cost of our service is transparent. Contracts run for 12 months at a time. Unlike other brokers, who meet with their clients once-off, we meet with our clients four times over the course of the year. Clients have the option to renew should they find value in what we offering.
When the only tool you have in your toolbox is a hammer, everything looks like a nail
The thing is, money and our relationships with it is complex. At NFS we value relationships and do not presume to know all the answers after one meeting. Our first consultation is also free! Our concern is that not every problem can be solved with a policy.
We help our clients budget, manage finances and build wealth. Insurance could be one of the tools, but not the final goal. There is more to protecting your lifestyle than dealing with the everyday episodes of your personal reality show As the World Turns and Burns.
Should you, dear client, need an insurance product, we will make sure you get the best. BUT, we will only accept one tenth of the normal commission. This saving is passed on to you and could be as high as 35% for the life of the product. That saving more than covers our fee.
So, how do you know whether a particular policy is what you need and whether the premium should be R557 per month or only R350? Improve your financial literacy through trusted financial advice in the context of a sound, professional relationship.
But you are in Cape Town and I live in Parys…
We are technologically savvy. This gives you options – meetings can be held face to face at our offices, or via Skype. More than half of our clients do not live in Cape Town. So. Should you find yourself exploring Istanbul yourself, and you find yourself in need of financial advice, we are only a screen away…