Yalu fights back as big banks cling to credit life policies
A new provider of credit life insurance has launched a cheeky public awareness campaign to highlight how some banks frustrate you when you exercise your right to switch your credit life cover to an alternative provider.
The #NothingToHide campaign, which was launched in Gauteng late last month with four mega billboards, 13 half-billboards and about 100 posters in hot spots and at major off-ramps in Johannesburg, Sandton and Pretoria, will move to KwaZulu-Natal and the Western Cape next.
The campaign's provocative message aims to get you to think about the cost of your existing credit life cover and bank conduct making it near impossible for you to switch to a cheaper provider, says Nkazi Sokhulu, the CEO of Yalu, the company behind the campaign.
Sokhulu says Yalu has been involved in a "one-year uphill battle" with banks, which have used "tactic after tactic" to stop consumers of credit from moving their credit life cover to Yalu.
He claims one bank blocked e-mails from Yalu. "We carry out the cancellation on behalf of the customer. An e-mail gets sent to the provider [the bank] along with all documentation that is required [to effect the switch]. The e-mail is sent from Yalu's server and the customer is copied in the e-mail. One of the banks blocked our domain. When we complained, the bank claimed we had sent to the wrong e-mail address. Within an hour, our e-mails were unblocked. This is what they do," he says.
"One bank allows customers to take out policies on their app and open bank accounts with selfies. But when it comes to cancelling a credit life policy, the customer must come into the branch," says Sokhulu.
Another bank tried to block customers from switching to Yalu, claiming it wasn't sure Yalu was a legitimate financial services provider (FSP), ignoring that Yalu has an FSP number from the Financial Sector Conduct Authority (FSCA), he says.
In what appears to be a stab at African Bank, one of the billboards asks: "Is it African for your bank to deny you the credit life insurance policy of your choice?"
Sokhulu says that though African Bank is not the only culprit, "they keep shifting the goalposts", making it increasingly difficult for customers to switch to Yalu. "We send them what they want, and two or three months later they ask for more documents that are not required by law."
They claim they are protecting customers, but "what they are trying to protect is their profits".
He says the additional requirements that banks impose only serve to frustrate customers attempting to exercise their right to switch, and breach Treating Customers Fairly (TCF) outcomes-based regulations.
TCF outcome six says that providers should ensure "customers do not face unreasonable post-sale barriers when they want to change a product, switch providers, submit a claim or make a complaint".
Sokhulu says: "TCF outcome six is the most abused. I never imagined the lengths providers would go to put up unreasonable barriers."
Asked what percentage of switch requests African Bank allows and the reasons the bank disallows switches, Basani Maluleke, CEO of African Bank, said it accepts 100% of substitution policy requests "should they meet our requirements".
If a new insurer contacts African Bank on your behalf requesting to substitute your credit life policy, African Bank will SMS you and advise you to visit your closest branch for identification and verification if you wish to switch, she said. The law prohibits African Bank from disclosing customer details to third parties, she says.
But Sokhulu says customers who take out a policy with Yalu sign a letter authorising Yalu to act on their behalf to cancel their existing policy. This is industry practice, he says.
Requiring you to visit a branch to cancel your policy places an economic burden on you, and is a barrier to substituting a policy since you are not required to do the same when you take out a policy, says Sokhulu.
This week, FNB customer Karabo Ngoatle sent the bank and CEO Jacques Celliers this tweet: "Hey why are you not cancelling my credit life insurance policy? It's been 7 months of asking the same thing? Times like this I miss @MichaelJordaan at the helm."
Lwazi Stuurman, FNB's head of public relations, declined to explain the process the banks' customers must follow to enable a switch, saying only that "the bank complies with all legal requirements relating to credit life insurance". Stuurman also declined to say what percentage of switch requests succeed, or how long it takes the bank to process a switch.
Charles Lorentz, a director of ZestLife, another credit life insurance provider, says the company has been negotiating with some banks for 18 months but has now reached "an understanding of due process and what is required" of ZestLife to successfully switch a client. ZestLife has service-level agreements with all major credit providers, he says. "It has been a long process and we've agreed to follow their onerous processes."
ZestLife's success rate in switching customers is "north of 60%", Lorentz says.
Naresh Tulsie, the ombudsman for financial services providers, says consumers who have been prevented from exercising their right to switch insurers can send their complaints to his office.
Soon-to-be-enacted conduct standards for financial institutions are intended to address market conduct issues of this nature.
But existing legislation, such as the Policyholder Protection Rules, already stipulates that you should not face unreasonable barriers when changing a policy.
Money spoke to two African Bank customers who have complained to the FSCA about their experience of trying unsuccessfully to switch to Yalu.
Caroline da Silva, the head of regulatory strategy at the FSCA, says its jurisdiction in such matters is limited. The banking standards would give the FSCA room to supervise, "but this requires agreement and clarification on jurisdiction between the FSCA and the NCR [National Credit Regulator] as to our respective roles," she says.
What is credit life cover?
• Credit life insurance covers your debt in the event of you dying, becoming disabled or getting retrenched before you've paid off your debt in full. In terms of the National Credit Act, a credit provider can make it mandatory for you to have this insurance, but the credit provider can't insist that you place your cover with any particular insurer. The choice is yours.
• After years of widespread abuse of credit life, the government introduced regulations that came into effect in August 2017. A key regulation caps the premium that you can be charged at R4.50 per R1,000 of cover on any policy taken out after this date.
• If you're paying more than that on an older policy, you should consider switching your cover to a provider that charges in line with the regulations.
• The National Credit Act gives you the right to substitute a credit life policy at any time after you take out a credit agreement, and in terms of the regulations the credit provider is obliged to accept the new policy if it offers "at least" the benefits referred to in the regulations.