Claims show a shift to the left

Medical research is big business. Globally, billions of rands are spent every year to improve the treatment of critical illnesses such as cancer, cardiovascular and musculoskeletal diseases.

As a result, a person’s chance of surviving these diseases have dramatically improved. A recent study by the University of Cape Town points out that if a person gets to a hospital within four hours of suffering a heart attack or stroke, their chances of survival is between 90% and 95%. 

These increased chances of survival has a major impact on the life insurance industry. Liberty recently released their 2018 claims statistics which shows that there is an important shift happening in the market where clients are becoming increasingly interested in insurance products that will provide cover for their life after surviving a critical illness/disability event. 

Crunching the numbers

Liberty reported that in 2018, the company paid out claims to the value of R4,7 billion. This equated to an estimated R18.8 million rand’s in claims being paid out on a daily basis. 

The company adds that the 2018 payments reached 28 453 individuals and their beneficiaries. 

Looking at the types of cover where the claims came from, the company paid out R3,3 billion in life cover, over R758 million in lifestyle protection, over R455 million in income protection on a lump sum basis and over R177 million in income protection on a monthly recurring basis. 

A shift to the left

Ursula Torr, Lead Actuarial Specialist: Liberty, pointed out that a lot more can be read into the claims statistics than meets the eye. 

“Times have changed, medical advancements have improved survival rates when it comes to critical illnesses which means that clients have an improved life expectancy. Critical illnesses are no longer a death sentence,” said Torr. 

She added that, traditionally, clients prepare for death and leaving a legacy for their families. “There needs to be a shift in the industry, and we are seeing it,” said Torr. 

Data from 2015 to 2018 has shown an increasing need for multi-benefit package of cover. As a result of this emerging trend in survival, life insurers and financial advisers are increasingly considering offering advice on a good balance of lifestyle protection cover and not just death insurance. 

Further, insurers and consumers should be looking for new solutions to improve the quality of life and survival in line with evolving trends and in accordance with clients’ ever evolving lifestyle changes. 

Changes over time

While this is an important industry shift, the change will only occur over time. 

Torr points out that of all of the claims received in 2018, 68,79% claimed against life insurance policies while 31,21% of the claims in 2018 were for disability cover.

“In 2018, more clients bought life cover as a primary need or necessity while neglecting the consideration of survival benefits such as disability cover, income protection, and critical illness cover,” said Torr. 

She added that only 10% of 2018 claimants claimed for more than one basic need. 

“Clients do not have the multi-benefit packages that they need. This presents a real opportunity for insurers and financial advisers to relook at the protection suite that is in place.  Of the people who claimed for both lifestyle and loss of income, only 12% claimed for life cover. This means that 88% of protection was needed during their lives and not at the end of it,” said Torr. 

Shifting gears

Shifting gears, 2018 was a significant year for the industry in terms of non-disclosure. 

In a press release to the media, Lisa Gibbon, Divisional Executive for Onboarding at Liberty pointed out that non-disclosure is a diminishing problem for the company. 

“We've placed a strong emphasis on ensuring that advisers and clients focus on providing true and accurate information during the underwriting process. We've also been encouraging advisers and clients to continuously keep us informed of any life changing medical and lifestyle changes that would impact their policies,” said Gibbon.   

She added that the importance of full disclosure should be a priority conversation that all insurers should be having with their clients and advisers as often as possible. Not only will it help to reduce the occurrence of non-disclosure claims, it will also ensure that clients receive their pay-outs when they need it most. 

"As an insurer, we have a responsibility to ensure that all valid claims are paid. However, we also encourage clients to submit claims even if they are uncertain of the severity of their condition or if the condition is covered under their policy benefits,” said Gibbon.

Editor’s Thoughts:
How are insurers managing the longevity challenge? While it may result in fewer claims, surely the money that they are saving is being paid out elsewhere? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.