New life insurance company, 1Life Direct, has come out with guns blazing trumpeting its arrival with an attack on broker commission.

Touted as the first ‘truly direct’ life insurer in the country, the group is hoping to garner as much as 6% of the pure life market by 2010.

At the launch, Lenerd Louw, 1Life Direct CEO, said: “Of late the life insurance industry has been shrouded in negative press and several life insurance companies have been forced to admit that they have not been treating their policyholders well. This has resulted in a growing loss of public confidence and has alerted us to the fact that there need to be an alternative.”

While Louw conceded that most of the negative press has been focused on the savings part rather than on the risk side, he maintains the problems extend into the risk side of the sector.

“I think one of the reasons so much of the press has been focused on that side of things is because the problem there is so huge, rather than there being no problems in the risk side. On the risk side the commissions are also huge,” he told Moneyweb.

The company, that has a current staff complement of 29, is hoping to have around 180 000 customers by 2010 with a premium income of around R800m.

1Lifedirect is 100% owned by Guernsey-based, Budget Holdings Limited (BHL), the same company that owns Leon Vermaak’s company Telesure, owner of Budget SA and Auto & General.

The company currently only offers risk cover between R50 000 and R5m and is targeting LSMs two to ten.

The group believes it will make an impact, not only in the higher LSM group’s where life cover is traditionally sold, but also in the emerging market.

“According to a Finmark Trust study,” Louw says, “87% of South African adults do not have any life cover and the main reason for this is lack of affordability. From a price perspective, direct life insurance allows the consumer to save up to 22,5% on broker commissions.”

One analyst told Moneyweb, however, that he doubts direct insurers such as 1Life Direct will pose too much of threat to the established players in the short term.

“Generally people seem to prefer buying life cover from established names,” he says, “There are those who will go direct but in the short term I do not think it will have a major effect.”

Source:  Moneyweb March 2006