Why are Medical Aid Brokers so thin on the ground?
Medical aid premiums, as a percentage of your disposable income, has been growing every year – not even salaries have been keeping up with the double digit growth. I have come across very few people who are still on the same level of plan they were a decade ago, and more often than not that downgrading has happened several times. For many of my clients medical aid premiums are easily more than their life cover or short-term insurance – often combined. With that sort of ‘investment,’ you’d think financial advisors would be crawling over you to get the commission on the deal, but it just isn’t so. Most people have no idea who their medical aid broker is and all queries are channelled through to the call-centre.
Why is this? It boils down to remuneration (like most things). Like life insurance, the allowable commission on medical aid is capped at 3%. Where it goes pear-shaped is that this is capped at R69 (in other words as soon as the premium goes over R2300 pm, no additional commission is paid). This cap has been growing at 2.3% per annum, when medical aid premiums have been growing in the double digits. In other words, unless your broker has a substantial book of corporate clients, he or she is probably looking after your medical aid as a service – it certainly isn’t going to make them rich, in fact it probably won’t even cover the cost of looking after it for you. The major motivating factor for them looking after your medical aid is to keep out other brokers who might make a play for the rest of your (much more profitable) risk and investment portfolio.
Is it a train smash that you get ‘low or no’ advice on medical aid? I know from experience that trying to get on top of all the small print on just one medical aid is a nightmare, and it changes every year. It is almost impossible to know just what sort of cover is available for every condition, and anyway there ‘appears to be’ a large element of subjectivity involved. Claims or authorisations have been refused because the medical aid considers the member ‘too old’, the premature baby ‘too small’ or the liver transplant recipient ‘an alcoholic’. Trying to decipher the real changes in a medical aid plan every year needs Sherlock Holmes, and the average member hasn’t got a hope!
What sort of value can an advisor bring? Realistically the one time having a broker in your corner works is when a claim is rejected and you need to escalate it to the Council for Medical Schemes – which is increasing in frequency every year. Once you’ve picked a medical scheme, changing it is a royal pain. You are usually given a 3 month ban on claims, plus a 12 month ban on condition-specific claims.
It is hardly surprising that covering the ‘risk’ of a serious medical condition is no longer a one trick pony. Gap covers are springing up all over the place, and expanding into areas like dentistry, optometry, cancer-specific risk areas. This is smart. Those are some of the areas that can eat up your savings in a single visit. If you do the maths, having a hospital plan and gap cover can save you hundreds of rands and get you a better deal.
Dread disease cover from ‘long-term’ insurers are coming into their own. No longer are they a ‘nice-to-have’ addition to your policy, but a much-needed lump-sum to pay for those costs that increasingly not covered by the medical aid. Just a quick heads-up: Rather take out a ‘Rolls Royce’ product that pays 100% on Stage one and even reinstates after claim than a ‘Severity based’ product that will pay you out in incremental amounts as you get sicker. Why? Most of the costs are incurred on first diagnosis, and that is when the treatment needs to be as radical as possible to ensure there is no repeat.
Action: Take a holistic view of your Medical Risk – should you be taking some of the premium away from your medical aid and putting it into gap cover or dread disease insurance? This is a good time to be thinking about it, if you want to change plans you need to do it before mid November. If you’re not sure how to do that, give Dawn a shout HERE.
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Author Dawn Ridler ©