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Insurance claims are soaring — and it’s not just th...

Business Maverick

BUSINESS MAVERICK

Insurance claims are soaring — and it’s not just the pandemic to blame

(Image: Adobe Stock)

New figures show South Africa’s insurance companies are facing a whirlwind of claims — even before the effects of the coronavirus pandemic are taken into account — posing difficult questions about the long-term health of the industry.

Momentum Life Insurance has paid out claims in excess of R19-billion over the past five years. The company revealed at the recent 2020 Risk Summit that 2019’s claims had been the highest in its history — at a staggering R4.6-billion. 

Momentum’s 2019 payouts were made up of R3.3-billion in death claims, R695-million for critical illness, R98-million in income protection and R499-million in disability. Altogether, the company’s claim payouts were up 30% from 2018 with an expected even bigger rise for 2020.

Head of life insurance marketing George Kolbe said Momentum Retail Life Insurance paid out 93% of claims in 2019, across all benefit types. 

He noted that claim statistics for 2020 and 2021 might look very different from those of the last couple of years. To a certain extent, the 2019 experience would be the benchmark against which the company judged the impact of Covid-19.

Jenny Ingram, head of product development and pricing at Momentum Life Insurance, added that 2020 had already provided a window into the impact Covid-19 would have on life insurance product providers.

Momentum had paid out more than R150-million in Covid-19 death and disability cover so far. Ingram said Momentum has seen an increase in the number of death claims in this period, peaking when the country moved into lockdown Level 3.

“This shows us the time it took for infections to escalate and result in death. You can see it took a few months to reflect,” said Ingram.

It might be surprising to some that critical illness claims decreased during lockdown, but Ingram said this was indicative of the worrying trend of people being too afraid to go to hospitals or doctors to get diagnosed and begin much-needed treatment.

“The repercussion is that we are likely to be paying more claims later on and potentially for further progressed illnesses when people become more comfortable to visit their healthcare professionals and hospitals.”

“The death number is self-explanatory as the infection rate reached its peak (and we typically see the deaths slightly later),” Kolbe added. “And older lives were more affected. We also saw a significant reduction in the most severe levels of lockdown on unnatural death claims like motor vehicle accidents, suicides and murders.

“You can see critical illness claims declining, related to the fact that people avoided going to hospital and doctors, so they didn’t get diagnosed. We might see spikes later,” added Kolbe.

Sanlam also predicts a rise in claims for death, funeral, sickness and income protection in 2020, due to the coronavirus pandemic. 

Petrie Marx, product actuary at Sanlam Individual Life, said this year had been testament to how easily one’s health and life can change and the impact such a change can have on one’s finances.

“The current uncertainty has made many people appreciate the importance of making sure their loved ones are looked after financially should something happen to them.”

Sanlam’s 2019 claims show that cardiovascular disease, cancer and accidents remain the leading causes of claims and the company is urging clients to “future-proof” their financial lives.

Our 2019 stats show the risks of severe injury or illness unrelated to the coronavirus are real. Many people are underinsured or not insured at all, with the most recent research showing the biggest shortfall in disability cover.

The group revealed its 2019 claims statistics amounted to a whopping R4.3-billion. Of this, R397-million was paid for income cover, R3.25-billion for life cover and R406.5-million for injury and trauma-related claims.

Marx added: “Our 2019 stats show the risks of severe injury or illness unrelated to the coronavirus are real. Many people are underinsured or not insured at all, with the most recent research showing the biggest shortfall in disability cover.”

As a total, South African life insurers paid claims against fully underwritten individual life policies in 2019 to a value of R16.7-billion. The 2019 annual death claim benefit statistics for fully underwritten individual life policies, released in October by the Association for Savings and Investment South Africa (Asisa), showed that life insurers received 27,547 claims and paid 27,304 claims, representing 99% of claims received.

“Fully underwritten life policies are only issued if the individual policyholder has participated in a full underwriting process, which involves a comprehensive assessment of the life insured’s health and medical history,” the organisation stated in its press release on the matter.

Rosemary Lightbody, senior policy adviser at Asisa, commented that while the number of claims received in 2019 had been the lowest since 2012, when Asisa started consolidating statistics for fully underwritten individual life policies, the value of claims paid has more than doubled from R6.8-billion to R16.7-billion.

Around the same time, Old Mutual announced it paid R11.3-billion in personal cover claims in 2019, totalling R45-million for every working day of that year. The payouts included underwritten, non-underwritten and corporate claims. Old Mutual’s claims statistics report for 2019 unpacked its underwritten claims, which amounted to R5.33-billion of the overall amount paid, made up of R4.02-billion in death cover, R739-million in severe illness and R561-million in disability claims. Old Mutual also paid out R10-million in retrenchment cover.

“The Covid-19 pandemic has shown us how unpredictable life is and why it is important to have adequate cover that protects individuals and loved ones from sudden and life-changing events, whether death, disability, illness or retrenchment,” said John Kotze, protection product head at Old Mutual.

Liberty announced that R23-million in claims each day had led to R5.9-billion in claim payouts in 2019.

“This isn’t just a number to us. It’s the story of how we actively supported thousands of customers in just one year by settling over 120 claims each working day,” Liberty Corporate told Business Maverick.

“It is important to note retail claims on our lifestyle protector product. We do not collate for claims from our corporate claims. We are looking to have those numbers for our 2020 claims statistics,” it added. DM/BM

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