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Looking for a smarter way to improve premium collection and reduce policy lapses? Salary stop orders can help brokers build more sustainable business while giving clients greater certainty that their cover remains active. Whether your clients work in the public or private sector, stop orders may be easier to implement than you think.
Stop order business in a minute
- A salary stop order can be set up for anyone who has a wage or salary that is paid to them, whether payment is electronic or not and whether the employee is in the public or private sector.
- There must be a written agreement with the insured, member or life assured, agreeing to a stop order payment for premiums.
- Salary stop order premium paying policies have lower lapse rates than debit order paying policies because the money is paid before the salary is paid into the bank account.
- Product providers such as 1Life Insurance can help you set up a stop order facility, which may also be available on platforms such as Vantage from 1Life.
Stop orders’ 101
There are over 16 million earners in South Africa, with over 8 million earning more than R99 000 annually, according to the 2026 Budget Review. That’s a big potential market for new business with many premiums and contributions that can be paid via a salary stop order. But there are a number of misconceptions around stop orders and who can use them.
Salary stop orders are paid from a salary to a third party
A salary stop order is money that is deducted from a salary or wage and paid over to a third party before the net salary is paid to the employee. For example, an insurance premium is deducted from Ms A’s salary for her life and funeral cover policy. That money is paid to the insurer and Ms A receives her salary less the premium paid.
Salary stop order business has lower lapse rates than debit order business
Because the money for the premium comes off before the salary arrives in the bank account, there is a smaller chance of unpaid premiums than when money is taken from the bank account via a debit order. Simply because: the money cannot be spent before premiums are paid. Clients and advisers benefit. Clients are more certain of cover, and advisers have better persistency.
Any salary or wage earner can have a stop order
They are not exclusively for government employees. Anyone with a wage or salary can have a stop order. Some stop orders operate electronically, such as those on the Persal government payment system. Others require a stop order to be lodged with an HR department or wage clerk to set up.
Agents and advisers must be registered on QLink to write Persal stop orders
Writing business for a government employee that is paid via the Persal system requires agents and representative’s registration on QLink, with their correct IDs and details. This will be compulsory from August this year.
There are some stop order rules
Stop orders aren’t a free for all. There may be employer criteria with regard to salary stop orders such as a maximum contribution based on affordability. In general, the Basic Conditions of Employment Act allows for up to 25% of a salary to be deducted, however employers may have other rules and eligibility criteria such as a minimum salary at which deductions are allowed. Government employees’ stop orders must be no more than 15% of the employee’s gross salary. Always check with an employer if they have their own specific rules for salary stop orders and what processes need to be followed. For Persal business and where stop orders operate electronically, qualifying criteria can be assessed at new business stage.
Ask your product provider for assistance in setting up stop orders
Product providers have stop order facility teams that can assist with setting up stop orders. Always ask for assistance as they know who to speak to, which questions to ask and forms to use and how to set up the stop order. Your broker consultant can put you in touch with the right person and team.
Don’t forget to check
Stop order business may have lower lapse rates but they still need maintenance. For example, an employee can leave and a policy lapse or a premium increase means the deduction falls outside of the qualifying criteria. Keeping a record of stop orders and checking for unpaid premiums will alert you to any of these changes that you can address timeously.
Convenience, quality and cover
Salary stop orders are a win win. For clients, salary stop orders are convenient and with more certainty of cover due to lower lapse rates, they and their families have better protection. For advisers, better quality business and higher persistency not only improves income certainty, but also opens up favourable commission structures. With help available to set them up, they should be a consideration for all new business.