Introduction:
South Africa’s funeral insurance market has changed significantly and become increasingly important to individuals due to the COVID 19 pandemic.
Executive Head of Retirements, Craigh Chidrawi, explains this development and the impact it has on the retirement funds market.
Did the pandemic impact death claims?
NMG Benefits has seen a marked increase in the number of death claims being received in the last year through the retirement funds administered.
Insurers NMG works with, observed a significant increase in death claims than expected since the beginning of Covid 19 pandemic. The value of the death claims was also higher than before because of deaths of higher income earning individuals, and therefore leading to higher level of cover.
NMG Consulting’s research team interviewed respondents from 35 different South African insurers. Results showed that the majority interviewed (43%) expect Covid-19 to contribute to profitability deterioration. Almost every insurer in this group has experienced worsening claims through increased deaths.
What funeral insurance trends are we seeing?
We are seeing an increased focus on the importance of funeral benefits. Where employers haven’t had this type of cover for all staff previously (for example where contract workers aren’t covered for funeral benefits), we are looking to introduce funeral benefits.
There has also been a need for funeral cover to provide benefits for not only the member, spouse, and children, but to extend this to other family members that would include the member’s parents.
What impact will this have on insurance costs?
At annual renewal, NMG’s risk benefits consultants have observed insurers increasing premium rates by as much as 60% due to increased claims experienced in that scheme.
The insurers are considering the claims experience at scheme and industry level, and in their overall book of business. This is being done by insurers to ensure sustainability and deal with future negative claims experience.
What does this mean for employee benefits moving forward?
In the past, doing a market testing exercise was a regular occurrence to ensure that the premiums and medical-free cover limits were competitive. When schemes are being rebroked, we see that most insurers quote similar pricing.
While existing insurers are retaining the medical-free cover limit, the market is quoting lower medical-free cover limits. This results in more members that need to provide medical evidence of good health. Some insurers have indicated that they may consider vaccination status when underwriting for individual cover. This is something to watch as group risk insurers may consider a similar approach going forward.
When premiums are increasing, it’s important to consider whether the most appropriate benefit structure is in place. Engagement may be needed to better understand needs. Different, innovative models need to be considered.
What critical impacts should employers and members be aware of?
It has become critically important to ensure members complete beneficiary nomination forms. Previously, funeral benefits were often paid to a family member when a member passed away.
Recent changes to insurance laws require that the funeral benefit be paid directly to the people nominated to receive the benefit in the insurer’s own nomination form. If there is no nomination form on record, the funeral benefit must be paid to the estate.
This could delay the payment of the funeral benefit and cause hardship. Our experience is that some insurers are giving employers time to obtain the correct nomination forms, while others are strictly applying the new legislation.
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