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COVID and the importance of insurance

01 July 2021 Nalen Naidoo, Divisional Executive: Retail Solutions at Liberty
Nalen Naidoo, Divisional Executive: Retail Solutions at Liberty

Nalen Naidoo, Divisional Executive: Retail Solutions at Liberty

Perhaps the biggest lesson of the COVID-19 pandemic is that our world is unpredictable. No matter how much effort we put into planning and forecasting, there are always some uncertainties. Insurance plays that key role to guard against the risk of the unexpected.

COVID-19 changed our lives and livelihoods in many ways – we started working from home, many people lost their jobs, while some experienced the loss of family members and friends. The hardship of the pandemic has shown that life cover, income protection and disability cover make up an essential safety net to safeguard our family’s financial wellbeing.

Financial freedom for your family

We may never know exactly how many South Africans have died from COVID-19, but South African Medical Research Council data shows that the number of excess deaths spiked well above pre-COVID levels during the first two waves of the pandemic. Deaths remained at elevated levels between waves and continue to trend above pre-COVID levels.

This finding is backed by Liberty’s claim experience. During the peak of the first wave between June and September 2020, mortality claims were three times higher than normal levels. We also paid out substantially more in funeral claims than originally anticipated.

This echoed what was happening to other insurers, with ASISA statistics indicating a 36,7% surge in death claims across the industry. Similarly, the Actuarial Society of South Africa found that the number of deaths over the course of the pandemic was nearly 60% higher than would have been expected in a normal year.

While the first wave mainly affected our older members, the second wave impacted younger, high income earners. The alarmingly high mortality rate highlights the financial risks associated with death – and the role life insurance plays in preserving the financial wellbeing of families left behind. Life insurance payouts can ensure families aren’t saddled with a debt burden or that there is enough money to educate surviving children.

It’s not just COVID

A worrying trend during the pandemic has been people’s reluctance to visit medical facilities for normal medical screenings, sometimes resulting in them not getting optimal and timely treatment for other conditions. There remains a concern that this could lead to an increased incidence of cancer, diabetes and hypertension, among others.

In 2020, death and impairment by cancer and leukaemia accounted for the highest claims from Liberty's Lifestyle Protector products, followed by cardiac and cardio-vascular-related causes. This is a reminder that we cannot let COVID overshadow other health concerns.

Income disrupted

Some people who have had COVID-19 have suffered damaging long-term effects to their health. The World Health Organisation (WHO) calls this “post COVID condition” (often referred to as "long Covid"), where people have symptoms such as fatigue, shortness of breath, recurrent fever and even depression for months. We don’t yet fully understand the long-term impact of post COVID condition.

We do know that many people hospitalised for COVID-19 are not able to return to their former level of functioning and require ongoing healthcare. This is where disability cover or income protection can offer some relief to people who are unable to work. These policies cover the income they would have earned had they been able to work as normal.

Another potential COVID-related “side effect” we may see is an increase in disability claims as South Africa’s economy has deteriorated due to lockdowns. Surveys of large insurers have found that in poor economic conditions, disability claims increase, and fewer claimants return to work. Although we have not yet seen a significant increase in disability claims since the start of the pandemic, this remains a concern for us.

South Africa’s current vaccine roll-out suggests it will be a long time before a significant proportion of the country is vaccinated. We expect COVID-19 will continue to be part of our experience for the foreseeable future. Mortality rates may not even return completely to pre-COVID levels within the next few years, as there may be ongoing impacts on the population’s health, and COVID might even become a part of daily life, similar to the flu, with treatments and vaccinations becoming routine events. The protection offered by various insurance products will continue to play an important role in alleviating some of the hardship of this devastating pandemic.

• How Liberty took care of its clients during 2020 -
• Life insurers pay more than half a trillion Rand to policyholders and beneficiaries in 2020, 8 March 2021 -
• Clinical long-term effects of COVID-19: World Health Organisation -
• Fourfold increase in death claims against fully underwritten life policies during second Covid-19 wave -
• Simeka Large Insurer Survey 21 April 2021

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