Seek professional advice for short-term insurance - FIA

This is according to Arnold van der Linde, vice president of the Financial Intermediaries Association of Southern African (FIA) and executive chairman of IntegriSure, who says that as long as this myriad of product options exists within the short term insurance industry - and as long as the terms and conditions of a policy remain as complex - then a financial adviser is necessary to interpret these options for the consumer to avoid a financial impact if a loss occurs.

An intermediary is not more expensive

"A common mistake made by consumers when choosing a financial services product is to assume that they will pay more if they go through an intermediary. While financial advisers can obtain highly competitive quotes as a result of their collective bargaining power, it is vital that this is not the primary consideration when choosing a product."

Van der Linde says it is important not to base an insurance decision solely on price, as this is likely to have a significant impact on the level of cover that is taken out. "Product providers offer different quotes based on the information given by the insured but the fact is that a lower premium often means a reduction in benefits offered.

"It may be a cliché but with insurance you do get what you pay for. If any product provider offers to reduce a monthly premium, it is critical that consumers understand what this reduction entails. You may save a few hundred Rand a month by eliminating a car hire option or raising your excess, but if you have an accident this saving could be overshadowed by the thousands of Rands needed to hire a car and pay the increased excess."

Consult friends or family

Van der Linde says increasingly consumers' decision to purchase insurance cover is based on the perception of a cheaper premium created by huge publicity drives by certain insurers. "As a result, the consumer does not end up asking the appropriate questions to ascertain the extent of the cover they are obtaining. Consumers should not assume that all products offer equal measures of comprehensive cover. Any business that wishes to rush the client through the process of obtaining a short term insurance quote with cheaper premiums and watered down cover should be strictly avoided."

He says one of the best tools at a consumer's disposal, however, are recommendations from friends or family. The proof of the value of intermediated advice is in the annual policyholder growth experienced by professional financial advisors who do not gain market share through commercial drives, but rather as a result of word of mouth through thousands of satisfied clients.

"However, when asking for advice from acquaintances, it is important not to ask how much they pay before a loss occurs but rather what they were paid afterwards. Claims experience is the ultimate test of the value of financial advice. It is here that the value of independent and professional advice is critical. Consumers should ask themselves whether they are merely being offered a quote or whether their time is being requested in order to receive the most suitable advice," concludes van der Linde.