11/04/2024
11 April 2024
FREQUENTLY ASKED QUESTIONS
Riskfin has received a lot of enquiries about the reasons why the premiums have gone up. A lot of clients are unhappy and
Riskfin would like to help you understand why these increases have happened. We have put together some of the questions
that we have received and have answered. We hope it will help you understand the reasons behind the increases.
1. What does an underwriter do?
The underwriter collects premiums every month. These premiums are what guarantee cover for the policyholders.
The premiums pay for the running cost of the underwriter. The underwriter mainly uses these premiums to pay for
claims in the event of a death. The underwriter must balance between having enough money to pay for the claims
they will receive and having enough money to pay the running costs of the business (office, electricity, salaries etc)
and make a profit. By law, any company that collects premiums and uses those premiums to pay out claims must be
registered with the FSCA as an underwriter. There are a lot of requirements that must be met in order to be approved
with an underwriting license.
2. How does an underwriter determine the premiums?
The formula for calculating premiums is very complex. That is why underwriters are required by law to employ an
actuary. An actuary is a specialist who can calculate what is best premium for a policyholder that will allow the
company to have enough money to pay all the claims and still have enough money for operational costs.
Once the actuary determines the amount, the underwriter will sell the funeral product at that price. To have enough
clients to pay the premiums to the underwriter, the underwriter will appoint intermediaries.
The job of the intermediary is to sell the funeral products that belong to the underwriter to people looking for policies.
The underwriter then pays that intermediary a commission for every policy they sell.
3. What does Riskfin do?
Riskfin is an intermediary and sells funeral products for an underwriter. Riskfin is also responsible for collecting the
premiums for the underwriters. Riskfin has the responsibility of paying over all the premiums to the underwriters
every month.
The underwriter creates the product, e.g. Singles and Family policy, (where you cover your wife and children only) or
the 1 Plus Policy, where you cover yourself and other family members who might not be your wife and children such
as your siblings and parents. After creating the product, the underwriter then sets the premium for the product.
Riskfin then sells these funeral products for the underwriter. Riskfin sells these products by appointing representatives
(people who work for commission for every policy they sell).
4. What is a representative?
A representative is someone that sells funeral products on behalf of a company. For an example Mossie Visser is a
representative of Riskfin. Riskfin sells funeral products for an underwriter. Mossie takes the funeral products and sells
them to people looking for funeral cover. For every policy that Mossie sells she gets commission. The representative is
also responsible for helping the policyholder make changes to the policy such as updating personal information,
adding or removing members and submitting a claim.
5. What does Riskfin do when there is a claim?
Riskfin has direct contact with the claims department for the underwriter. Riskfin does all the administration work on
behalf of the policyholders. We have the responsibility to make sure that all the documents required are present
during the claims stage. We provide the underwriter with proof of payments and answer all questions that the
underwriter asks when they are processing the claim. The decision to pay or not pay a claim lies with the underwriter.
6. Why does an underwriter increase premiums?
At the end of the day, an underwriter is a business. The reason for having a business is to make profit. If the business
does not make a profit, it will fail. If the amount of money that the underwriter is receiving from premiums becomes
less than the money the underwriter is paying out in claims, then the underwriter has a very big problem. It must
either shut down the business or it must increase the money coming into the business. To increase the money coming
into the business, the underwriter will increase the monthly premiums it charges to the policyholders.
7. Why does an underwriter cancel a scheme?
The funeral products that Riskfin sells to the clients are grouped by the underwriter as a scheme. The underwriter
reviews the amount of premiums that they receive from the scheme and compare it to the amount of claims that
they paid out for the year. This is called a claims ratio. The underwriter uses a claims ratio to make the decision on
whether to increase premiums or not.
If the claims ratio is too high, the underwriter can make the decision to cancel cover for the whole scheme. Once the
decision is made by the underwriter, there is no way that an intermediary can challenge the underwriters decision.
8. How does the underwriter inform the policyholder of the cancellation?
If an underwriter cancels the scheme, the underwriter must inform the policyholder of the cancellation. An
underwriter usually sends an email or an SMS to the policyholder. It is the responsibility of the policyholder to inform
the underwriter if and when their contact information changes. An underwriter may also require that an intermediary
notify the policyholders of the cancellation.
An underwriter must give the policyholder at least 30 days notice for cancellations. This allows the policyholder
enough time to find another funeral product to help provide cover for themselves and their family. If the policyholder
finds funeral cover that is similar to the cover that the cancellation underwriter was offering, the new underwriter
cannot put that policyholder on a waiting period. They will have immediate cover.
9. What can an intermediary do if an underwriter cancels a scheme?
An intermediary cannot challenge the decision of the underwriter if they cancel a scheme. An intermediary may
approach other underwriters and determine if they are willing to take on the cancelled scheme.
Riskfin is required by law to give all of the reasons why the previous underwriter cancelled the scheme.
10. Why are the new underwriting premiums higher than the previous premiums?
As mentioned before, calculating premiums is a complex subject that must be determined by qualified actuaries. The
claims ratio of a scheme plays a very big part of the calculation. If the claims ratio is high, that means that the scheme
is a high risk scheme.
To manage the risk of having a lot of claims, the new underwriter has offered the new premiums which are higher
than the previous premiums.
Riskfin cannot challenge the pricing of the underwriter, the same way petrol stations cannot challenge the pricing of
petrol or bank account holders challenge the pricing for bank charges.
11. Can I get a refund on premiums?
When a policyholder pays a premium to the underwriter, they are passing on the risk of financial obligations to the
underwriter. The underwriter is guaranteeing a set amount of money will be paid to the policyholder if a death
happens. Once the premium is paid, the cover continues until the next premium date. You cannot enjoy cover and ask
for a refund at the same time. The entire purpose of funeral insurance is to guard against a future event date that you
know will absolutely happen but you are unsure when. That is the peace of mind you are paying for with your
premium. This is not refundable.
12. What are your options as cancelled policyholder?
There are a lot of funeral products being offered by many different companies. These products have different cover
amounts, different members you can cover and different premiums. There are too many to summarize in this
document. It is important that you speak to a representative when deciding on a policy as they are trained to explain
all the details of the policy.
While Riskfin would prefer to be your service provider we understand that you must choose a product that best suits
your unique needs and budget. We urge you to contact as many underwriters as you can before making a decision
about your next funeral product.
If the premiums are too high, please contact your representative how you can reduce the costs of the monthly
premiums to make it more affordable. There are solutions that can be explores such as reducing the cover amount or
reducing the number of members etc.
RISKFIN.CO.ZA
www.riskfin.co.za
Knowing where to turn when it comes to financial decisions is half the battle won, trusting the financial advice you get is the other half. Our clients are the most important visitors to our premiseswe always put the interest of our clients first.
