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Unclaimed insurance benefits run into the billions, but payouts are increasing

Unclaimed insurance benefits run into the billions, but payouts are increasing

South Africa had R88.5-billion in unclaimed assets in 2022, with unclaimed insurance benefits making up 38% of the total.

Life insurers cumulatively paid out almost R600-billion in claims last year.

We took a closer look at three life insurers – Discovery Life, FNB Insure and Hollard Life – to identify trends. 

Besides increased payouts and a higher percentage being paid out for income protection and critical illness cover compared to death claims – one of the overwhelming trends was the number of beneficiaries who failed to claim because they were unaware of the life policies.

According to the Financial Services Conduct Authority (FSCA), South Africa had R88.5-billion in unclaimed assets in 2022, with unclaimed insurance benefits making up 38% of the total.

The problem of unclaimed benefits is not a new one in the insurance industry and it led to the creation of a pre-emptive claims proposition in 2018, which is a business-triggered claims notification process that traces beneficiaries proactively to make them aware that they are beneficiaries of insurance policies which they can claim from.

Insurers such as Discovery Life, Liberty and FNB Insure initiate this process on behalf of customers by proactively accessing and analysing data from the Department of Home Affairs’ population registry to pay beneficiaries when a policyholder or an insured life passes on.

FNB Insure has paid out more than R700-million across more than 11,000 pre-emptive life insurance claims since inception, with an average of R2-million in claims per month over the past year. The highest pre-emptive life cover claim processed was R6-million for life cover and R100,000 for a funeral policy.

Evodia Phahlane, chief operating officer of FNB Insure, says, “Through our pre-emptive claims process, we are able to initiate the claim on behalf of beneficiaries who are not aware of the policies their loved ones might have taken.

“Over the years, this has saved families against financial hardship after losing their loved ones who may have been breadwinners.”

FNB Insure disclosed in March this year that it had paid out more than R13-billion in life insurance claims to its customers in 2023. 

“Our approach and processes not only demonstrate our commitment to paying out valid claims but also show our unwavering focus on being a trusted life insurance company to our customers,” Phahlane adds.

Discovery Life’s deputy chief executive officer, Gareth Friedlander, says the insurer makes use of its link with the Discovery Health business to identify possible claims for clients who are members of Discovery Health Medical Scheme – and this helps to accelerate the claims process.

Prompted by medical diagnoses, Discovery Life kickstarts the claim process and proactively reaches out to clients for any supporting documentation, leading to the payment of claims earlier and more efficiently – and in some cases, paying claims that may otherwise have gone unclaimed.

“In 2023, we paid 99.2% of all claims, with less than 0.8% of claims repudiated. Approximately 0.5% of this was due to non-disclosure, 0.2% for misrepresentation and 0.1% for fraud. 

“Our exemplary claims track record is a testament to our promise to our clients and confirms that we are there for our clients in all moments of their lives, with high-quality cover,” said Friedlander.

Discovery Life’s 2023 statistics reveal a positive trend in terms of earlier detection of severe illnesses, influenced by an increase in health screenings and a significant decrease in Covid claims.

Over the past year, Discovery Life paid claims to the value of R8.4-billion across both group risk and individual life policies. Group risk policies are policies taken out by employers on behalf of all their employees and typically don’t require underwriting or a risk assessment.

On the individual life insurance policy side, Discovery Life paid R6.45-billion in claims for individual life policies. This included R3-billion in death claims, R1.5-billion paid out in severe illness benefits, R1-billion under the capital disability benefit, R613-million under income continuation benefit, and R298-million under various other benefits.

Added up, the total value of claims paid under individual life policies to date exceeds R53-billion.

Friedlander says it’s also worth highlighting that “the total amounts we paid through all living benefits (benefits paid while you are alive) are higher than what we paid towards (death) claims, which highlights the relevance of comprehensive and full body cover”. 

Fifty-one percent of the total claim amount in 2023 was paid under living benefits.

What happens to unclaimed benefits?

The Association for Savings and Investment South Africa (Asisa) requires that when all reasonable attempts to trace the customer, heir or beneficiary have been exhausted, those unclaimed assets should not be paid to shareholders or treated as income but should be invested in socially responsible activities.

That investment should be in an appropriate vehicle within the context of South Africa’s social development needs – mainly in high social impact funds with a commercial return, such as industry initiatives and/or enterprise supplier development funds. This does not, however, apply in the case of risk policies such as annuities, where the payment of the benefit ceases on the death of the policyholder or beneficiary.

While different insurers have varying protocols for retaining unclaimed benefits, Hollard Life Solutions preserves unclaimed benefits after the benefit has been deemed unclaimed. During this time, the assets are held in an interest-bearing account to safeguard the interests of potential beneficiaries in the event of a subsequent claim. 

Avinash Baboolal, head of claims at Hollard Life Solutions, says the right of policyholders to the unclaimed asset persists until the claim is settled, irrespective of the timeframe.

“If you believe you are owed unclaimed benefits, you are encouraged to contact your insurer or broker. This process may present added complexity for beneficiaries who are unaware of their nomination for benefits.” 

In such cases, Hollard advises beneficiaries to contact insurance companies directly to determine whether their loved ones had policies with them. 

“The process may be easier to facilitate if you have any of the policy documents,” Baboolal says. DM

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