Opinion: Gap Cover - the smart choice in tough economic times
JOHANNESBURG - South African families are restructuring their household finances to cater for the extended period of low macro-economic growth, and rising input costs in key cost areas like food, petrol, transport and energy.
As the economy continues to lag – 2017 will likely see less than 1% GDP growth – we all need to make sure we are making the most rational purchases and work responsibly with our money. We’re seeing smart folks delaying the purchase of a new car, taking a local rather than an international holiday, eating out less, or switching to so called ‘no-name’ brands at the supermarket, among many other tactics.
For some families, especially those hit with retrenchments (as SA’s employment levels continue to worsen), even more extreme money-saving tactics are adopted.
Cost Drivers
One area of household expenditure that always comes under review is insurance. From fixed-asset insurance, to life insurance, to medical insurance.
Looking at the realm of medical aid, we see a trend of families downgrading to more basic plans that provide lower levels of cover. And for good reason: Medical scheme inflation is routinely higher than CPI and even salary inflation. This means these products are costing you more and more every year.
A recent article in BusinessTech cites forthcoming regulatory changes, set to impact millions of medical scheme members, “as government seeks to use medical aid tax credits to finance the National Health Insurance (NHI), which would push the overall affordability of private healthcare much lower.” If implemented, this will mean that consumers will need to pay even more for private medical scheme membership in future.
While costs pressures have escalated the level of cover offered in the medical scheme market has also decreased over time. This is partly due to medical schemes trying to reduce the cost of contributions as well as doctors charging more for services.
For specialised medical care, doctors and other medical professionals generally charge at rates that are multiples of the stipulated medical aid rates, leaving families to fill in the ‘gap’ from their own pockets. In some cases, the portion of the bills left to members to pay run into the tens of thousands of rands.
Smart Purchasing
As families look to reduce monthly costs, but still achieve adequate insurance against medical events, the concept of Gap Cover rises to the fore. Gap Cover offers an effective way to mitigate against the risk of those heart-sinking, crippling medical bills, while keeping your total monthly insurance premiums at affordable price-points. In a world of escalating costs it is the smart thing to do.
For just a couple of hundred rand a month, one can sleep easy, knowing that the Gap Cover will provide much-needed protection to your entire family in the case of medical shortfall payments. Gap Cover is tailored to individuals and focuses on those more serious medical conditions and injuries that require hospitalisation and specialised treatment.
For brokers, Gap Cover is a great way of providing enhanced value to one’s clients. They’re able to reduce this risk for their customers, but without a significant impact on their pockets.
Medically-driven (not financially-driven) decisions
Gap Cover is a complementary service to your medical aid that gives families peace-of-mind. The product works with your medical scheme coverage and your choice of Gap provider is thus very important. We don’t advise clients to opt for the first Gap Cover option that they see. There are a wide range of options, to suit different individuals’ and families’ needs. At Turnberry, we always advise that conversations about Gap Cover be handled professionally and in a structured way, with one’s broker.
Most importantly, we believe that decisions about one’s health should always be medically-driven, and not financially-driven. As our national health services currently offer little in the way of specialist care, as individuals and household heads, we shoulder the burden of these costs.
Gap Cover provides the affordability and the flexibility to help you pay for important medical consultations, tests and procedures without ruining your finances, and to recover safely – returning to good health as quickly as possible.
Tony Singleton is the CEO of Turnberry Management Risk Solutions
- BUSINESS REPORT ONLINE