Getting excited about life insurance may sound like an oxymoron but as I sat through the presentation of new long term insurance company BrightRock that is exactly how I felt – finally I had found the life cover I have been waiting for. As I walked out of the presentation I called my adviser and told her to look into immediately.

What BrightRock has recognised is that the insurance cover you need today is in all likelihood not the insurance you need in 20 years’ time. Yet with traditional life cover products you buy cover today which is priced for you to hold until you die at your estimated mortality date somewhere in your late 70’s – even if you don’t need it.

Right now my liabilities are pretty high. I have a hefty mortgage and two young children and am an equal breadwinner.  So my insurance needs are big, in fact my adviser told me that I am running a “shortfall” of around R2 million on my current insurance. However I have no idea how she reached that figure or what exactly my needs are.

What also frustrates me is that within the next seven years my mortgage will be fully paid (all going according to plan), my children will only have ten years of dependency left and my savings would have doubled – this means my insurance needs would have halved. What I need is a product that that allows me to increase and decrease my insurance needs as required. And that is exactly what BrightRock provides and in doing so it reduces my cost of insurance.

What BrightRock has done is to quantify your specific needs and then calculate a premium against each one. Rather than thumb sucking some figure about why you need R5 million worth of cover, this breaks it down to what you need each month to live such as your mortgage, household expenses, child’s schooling and medical aid. And then it provides an individual premium to cover each of those costs. So now I know exactly what expenses I need to cover and how much each need will cost. If you can’t afford all the premiums you have a clear idea of where the shortfall lies and can therefore prioritise cover and calculate how your current savings and pension would address that shortfall. In short, it allows you to plan effectively.

One of the ways BrightRock is able to cut premium costs is to base the cover on how much longer you have the liability, such as your mortgage.  If you only have ten years left on your mortgage, it will only quote you on life cover for those ten years – as a result the premium costs are driven down significantly as the risk of you dying in the next ten years is significantly lower than the risk of dying in the next 30 years which is typically how a traditional insurance product would price.

Around ninety percent of insured consumers opt for an age-rated policy due to affordability. As the policy is priced according to your age it is cheaper when you are younger but then escalates aggressively as you get older. By the age of 50 it would start to become unaffordable so you would cancel the premium hoping by then your mortgage is paid off and the children are off your hands. Basically you take out insurance with the full understanding that it will become unaffordable and that you will cancel it in the future. “These insurance products aim to price you out of the system,” says Rob Rusconi, non-executive director at BrightRock.

By insuring through BrightRock I can take out cover I need today and, as my mortgage is paid off, my savings increase and the number of years I need to provide education for my children is reduced, I can cut my cover and my premiums further.

However if I face a major life event like a child becoming disabled and a dependent for life, or I decide to buy another property and take on more debt, I can ramp up my cover again with limited underwriting. Each year I am able to sit down with my adviser and reassess my needs. Under a traditional policy, changing cover would incur additional costs as the policy would have to be cancelled and a new policy issued.

The product will only be available through independent financial advisers and at this stage is not offered directly, however a client can select the commission structure to be either upfront, pay-as-you go or a combination of both. Keep in mind that upfront commissions always cost you more as it has to be funded through the policy, incurring interest costs.

At the end of the presentation I did wonder “is this too good to be true? What am I missing?” BrightRock has been partnered and funded by insurance group Lombard Life which has also provided the license. Lombard Life general manager Rob Rusconi, who is a non-executive director at BrightRock, blew the whistle on the costs of the pension fund industry and is viewed as having credibility within the industry. The founders include former industry players like Miles Japhet who was MD of Hollard Insurance Group and Suzanne Stevens who is ex-Discovery Life.

The company is underwritten by mega reinsurer Hanover Re and regulated by the Financial Services Board which requires them to have enough reserves to pay out all policy holders should they close up shop.

The one concern is that it is a challenge to compare quotes as no other life company offers a similar product. What my quote did however was show exactly where my shortfalls lay and how that would impact on my planning. I need to reassess where I want to beef up my cover and what liabilities my current savings would cover, but I feel more in control through their quote system as I understand exactly what is being covered.

The science behind this product is not really new, it is just the way they have packaged the various existing insurance options into one cover to provide flexibility and make it more accessible and easier to understand. Clients like to have explanations and a full understanding of what it is that they are buying and why – and this is something BrightRock has achieved. There is no doubt that this product is going to deliver a good shake-up to an insurance industry that desperately needs it.

This article by Maya Fisher-French was first published in Mail&Guardian