No-claim cashback offers are not the only way for insurance brands to reward their clients. In fact, innovative players on the market are rewarding all their clients, including those who claim…

A ‘no-claim cashback’ pays back part of the car and household premiums a customer has paid – but only when the customer has not claimed over a certain period, usually three years. There are, however, other ways to reward insurance customers, regardless of whether the customer has made a claim.

‘Consumers place a lot of value on no-claim cashback rewards, and they’ve become a regular feature of the insurance landscape,’ explains Mutoda Mahamba, CEO of Solvency[1]. ‘There’s no doubt that no-claim cashback rewards can be a valuable benefit to someone’s finances. Nonetheless, it’s important for consumers to realise that they can have more control over their insurance rewards, through solutions that benefit them continuously and not only at the end of a no-claim period.’

On average, 8 out of 10 customers will pay more in premiums than they will claim over a 3-year period. It’s therefore possible to reward a customer by looking at how much they have claimed relative to the premiums they have paid, instead of whether they have claimed or not. If premiums paid exceed claims, the customer can be rewarded.

In addition, insurers also invest the premiums that their customers pay and make an investment profit that is not shared with the customer base.

‘Once a customer pays premiums to an insurer, that money legally belongs to the insurer,’ says Mahamba. ‘But what is legal is not always what is perceived as fair by customers; hence there is a clear opportunity for insurance brands to allow their customers to participate in the investment income earned by the insurer.’

The Solvency solution is a case in point. It offers crucial short-term insurance cover, combined with the ability to save and invest seamlessly. It’s a unique solution that helps South Africans deal with two crucial challenges: protecting themselves and their families against key life risks and saving for the future. A former insurance executive with over a decade of actuarial experience, Mahamba founded Solvency after working at a range of prominent South African insurance companies. Through his work, he saw the opportunity to create a financial product that empowers consumers financially while also equipping them to manage the risk of negative life events, from burglaries to a car being written-off.

The Solvency solution empowers customers to allocate up to 45% of what could have been their monthly car and household premium into an Insurance Savings Account (ISA) in their name. The decision on how much to allocate to the ISA is guided by the excess the customer can afford in the event of a claim.

‘The ISA can be used to fund the excess in the event of a claim. But more importantly, up to 50% of the past 12-months’ ISA can be withdrawn directly to the client bank account,’ says Mahamba. If the client ever cancels the insurance policy, the full ISA is paid into their account.’

The implications for South African consumers are significant. The Solvency approach creates financial opportunities to achieve far more with monthly insurance premiums than would otherwise have been the case, effectively allowing consumers to grow their financial strength by taking advantage of the power of compound interest.

‘It’s a different approach to the traditional idea of an insurance reward, and one with the ability to dramatically alter a family’s financial planning for the better,’ concludes Mahamba.

[1] Solvency is an insurance product powered by New National Assurance Company, an authorised Financial Services Provider and registered short-term insurer.

Submitted by Msuku Media.