South African insureds benefitted from R8.4 billion in death, disability, severe illness and income protection pay-outs in 2023 courtesy just one of the country’s major life insurer brands. The sheer size of Discovery Life’s 2023 claims experience illustrates the value of life insurance to an economy; absent life insurance, these shortfalls would have to be carried by government and / or the family and friends of affected policyholders.
Cash for healthy engagement
Introducing a Discovery Life Claims Statistics media roundtable, Kashmeera Kanji, Head: Market Analytics and R&D at the life insurer said the annual claims statistics illustrated how the insurer kept its promise to clients, year-after-year. The insurer has paid claims totalling R53 billion over the 13 periods since 2011 alongside health- and wellness-related paybacks or returned premiums totalling R11.8 billion. “These paybacks represent cash returned to our clients in reward for their healthy engagement; this allows us to reduce the risk that clients pose to the life insurance part of the business,” Kanji said.
The insurer said that it had paid 99.2% of claims in the period under review with the main reasons for declined claims being non-disclosure (0.5%), misrepresentation (0.2%) and fraud (0.1%). “Material medical non-disclosure [involves] clients not informing us about serious conditions, where if they had informed us at the application stage, we might not have issued the cover or might have added some sort of exclusion,” said Sylvia Steyn, Head of Claims and Service at Discovery Life. She noted that misrepresentation often stemmed from incorrect descriptions of insureds’ occupations.
The overview of the insurer’s annual claims is a useful indicator of on-the-ground life insurer product performance, and is something that financial advisers should keep a close eye on. Over the past 12-months, the bulk of payments were made for claims against life cover, R2.993 billion; severe illness benefits, R1.508 billion; capital disability, R1.036 billion; and income continuation benefits (R613 million. Funeral benefits came in at just R33 million. And the balance, totalling R233 million, was spread across ancillary benefits that are not easily comparable across the market, under headings like health plan protector, global education protector and overhead expenses benefits.
C19 now a managed endemic disease
“The R8.4 billion represents combined 2023 claims pay-outs between group risk and individual risk,” said Gareth Friedlander, Deputy CEO of Discovery Life. Commenting on the impact of the recent pandemic on life insurer statistics, he noted 2023 as the first period of COVID being a managed endemic disease. “We have now moved into a different phase of the pandemic,” he said. In 2021, at the disease’s peak, the insurer recorded four times more COVID-related than cancer-related deaths whereas today the disease claims a small fraction of lives: 2% compared to cancer’s 28%.
Friedlander commented that although the R2.993 billion paid in 2023 life cover claims was 12% down on the prior year, it was marginally higher each year after the COVID impact was stripped out. “You can expect some volatility at a benefit level; but at a high level the claims paid should increase in line with our expectations,” he said. This writer was quite fascinated by the mix of benefits paid to living clients versus the beneficiaries of deceased clients. In Discovery Life’s case, 51% of 2023 pay-outs were to clients who were still alive, begging the question why so much of our collective focus is on life insurance as primarily a death cover.
“More than half of our claim pay-outs last year were to clients who were still alive but had [experienced] other life-changing events; people perhaps do not realise the extent of cover that they can get under the [broad] life insurance umbrella,” Friedlander said. He then shared that his firm’s experience was way above the 22% average across the industry thanks to a much higher take-up of its ancillary benefits. He credits incentivising advisers and clients through the company’s health and wellness rewards programme for this positive outcome. Another innovation mentioned during the presentation was the firm’s so-called proactive claims practise.
Proactive claims approach courtesy medical scheme
The life insurer uses data from its medical schemes administration business to proactively approach and pay clients who may be unaware that they have a claim against their life insurance policy. “Discovery Health is able to provide us with data which could flag that a client actually qualifies for a severe illness claim, for example, and we can reach out proactively to that client to indicate that there is a possibility that [he or she] may qualify for a claim; we start the claims process in that way, Friedlander said. He was quick to disclaim that life clients had consented to this data being shared.
Cancer and heart and artery disease dominated the insurer’s life cover claims statistics, especially for insureds aged 40 and over; but nervous system and respiratory ailments also featured strongly. “Unnatural deaths due to motor vehicle accidents are higher for younger groups,” said Steyn. Overall, one-in-six of the insurer’s 2023 death claims were for unnatural causes including motor vehicle accident, 30%; suicide, 28%; other accidents, 23%; and crime (19%). “We have seen an increasing trend in suicide, as we reported last year; this is the first year that it seems to have stabilised, but it remains at an uncomfortably high level,” Friedlander said.
Importance of income protection
Advisers and their clients were encouraged to consider income protection cover at an early stage, given the implications of becoming permanently disabled and missing out on 20- to 30-years of income. “It is important to think about disability insurance and do the right calculation in [terms of] how much you need; people tend to underestimate what their future income is worth … when you do a present value of future income calculation spanning a number of decades you end up with a massive number,” Friedlander said. “That is why you need financial advice and the right type of financial needs analysis”.
Cancer remains a major heath concern, and the experts participating in the round table were at pains to remind the media of the need to screen for this and other diseases. Dr Maritha van der Walt, Chief Medical Officer at the insurer, said that the five-year survival rate for catching breast cancer at an early stage was as high as 96%; if you diagnose in the late stage, this survival rate drops to just 30%. The good news is that the latest statistics show increased screening post-pandemic, with more cancers being diagnosed in the early stages. Payments for the diagnosis of a stage one cancer were 29% higher in 2023 compared to 2022.
“Cancer accounted for more than half (53%) of the claims on severe illness on females, and 35% on males,” said Van der Walt. She labelled cancer “a life-changing event” and said it was essential to have the right cover in place. Insureds were reminded that they may face co-payments for cancer treatments “even with a comprehensive medical aid” and that there were many hidden costs associated with a cancer diagnosis that were worth considering, such as taking time off work to support a loved one, travel and / or relocation costs related to treatments etc.
Health and wellness benefits
Friedlander concluded the presentation by reflecting on the positive impact of health and wellness on the insurer’s mortality and morbidity experience. “Our most engaged clients experienced 43% of the mortality rate of the unengaged population,” he said. “And you see a very similar picture on persistency”. He concluded that the R11.8 billion cumulative payback mentioned in the opening paragraphs was made possible by the lower claims and better lapse rate experience across the group courtesy an overall healthier risk pool.
Writer’s thoughts:
A healthier policyholder base stands out as a no-brainer for any business offering protection against mortality or morbidity events. Are you in favour of lifestyle rewards, or do you feel this model unfairly punishes insureds who do not live up to an insurers’ wellness programme? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
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Added by Gareth Stokes, 24 Apr 2024