South African banks that offer credit life insurance are “hiding behind” regulatory compliance to force smaller players from getting a slice of a pie worth more than R20 billion annually.
This is according to Nkazi Sokhulu, the chief executive of Yalu Financial Services, who recently launched an advertising campaign challenging the product transparency of South Africa’s financial institutions and educating consumers in the process. The #NothingToHide hashtag prompts consumers to question how much local credit providers are keeping from them when it comes to credit life insurance pricing and terms and conditions.
The campaign, developed by Yalu Financial Services, a credit life insurance provider underwritten by Old Mutual Alternative Risk Transfer, is challenging South Africa’s dominant financial brands to become more open about their products, so customers are clear about every detail of the contract.
Sokhulu said the billboard advertising is primarily focused on Gauteng, as most of the major banks have their headquarters in the province and also where the firms' biggest customer base is located.
“This was months of planning, months of thinking, months of observing. We saw a frightening activity from the big banks in terms of how they treat customers when they were actually just picking up their own rights as enshrined in the National Credit Act, and also enshrined in the credit life regulation.
But when consumers now act on the regulation, there are massive risks. They are now faced with competition that offers a better product for consumers, that offers a better price, that offers them rewards, that offers them things that they cannot do right now, because of their own limitations or whatever else it might be, they (banks) don’t want customers switching. What they do is they play compliance games; they tell customers this product is not good enough,” Sokhulu said. He said the credit life insurance market makes a profit of R25bn annually.
“They (the banks) don't want to lose their R25bn. You don't just walk in to intervene and say: ‘Can I have a piece of that R25bn?’ They will fight you. They don’t want you to compete,” said Sokhulu.
Tlalane Ntuli, co-founder and chief operating officer at Yalu, said credit life insurance covers borrowers against their debt in the case of retrenchment, disability and death.
“Borrowers don't know much about it. But the reality is that every South African has the right to choose their credit life insurance provider, and the fees charged for these policies can vary dramatically. If you don't know how much you're paying every month for credit life insurance, it’s possible that you are paying the maximum amount,” said Ntuli.
Ntuli said Yalu entered the market last year to challenge this status quo and the brand offers consumers a five-minute online take-up process that allows them to consolidate their different credit life insurance policies into one, saving considerably on monthly premiums.
“We expected credit providers to put up some resistance, but we were still surprised by how much they have tried to undermine the process,” said Ntuli.