FANews
FANews
RELATED CATEGORIES
Category Life Insurance

Critical illness, death have no respect for age

10 June 2024 Gareth Stokes

In 2023, one of South Africa’s leading life insurers paid out R28.85 million in claims every working day. It is a marketing headline, dear reader, and a bit of an attention grabber; but it illustrates the value that life insurance plays in you and your client’s lives. The message is clear: without this important cover, your clients and their families would be left facing serious financial hardships in addition to dealing with disease and / or loss.

Claims paid by disease and gender

Your writer attended the recent Liberty Cover Claims Stats 2023 presentation to get the lowdown on the death, disability and severe illness experience of the insurer’s policyholders. The data, as is always the case, offered deep insights into claims paid in the retail segment of the business, alongside information about the dominant causes of personal risks claims, and the gender split of these causes. In 2023, Liberty Retail paid out R6.72 billion spread across 29 676 valid claims to its individual clients, their families and beneficiaries. 

The bulk of this total was for life protection pay outs totalling some R5 billion, followed by disability claims of just over R1 billion and income protection of around R667 million. There were some interesting sub-trends in this data as death claims reduced by 7% compared to 2022, whereas so-called living claims were around 10% higher. The insurer sums critical illness and lump sum disability pay outs under its living claims heading. There was also a small annual decline in monthly income protection claims. 

The stand-out slides in this section of the presentation were those presenting multi-year claims pay outs under the death and disability cover categories. Anecdotally, they illustrate the strong lift in death claims during the two pandemic years spanning 2020 and 2021, and a resurgence of disability claims in 2022 and 2023. Commenting on the claims experience, Tom Crotty, Liberty’s Head of Risk Technical Marketing said more people were living through and surviving critical illness diagnoses. “People are surviving challenging, life-changing critical illnesses, which require lifestyle adjustments that can cost hundreds of thousands during their recovery phase,” he said. 

The usual suspects: cancer and cardiovascular disease

Liberty published the top five claim conditions across its various products as cancer (32.3%), cardiac and cardiovascular diseases and disorders (23.4%), respiratory disorders (7.3%), strokes (5.6%) and traumatic injuries (4.5%). Statistics still show a legacy skew to a male-dominated insured base, with 68% of claims arising from men. There was also some interesting age-based information that serves as a reminder to you and your clients that health shocks can occur at any age. For men, the average age of a claimant was 64 years, with the youngest and oldest claimants being 24 and 101 respective. For women, these ages were 61, 23 and 103. 

The top five claims causes introduced in the preceding paragraph accounted for just over 74% of the total claims paid to male insureds, and 72.6% for women. For completeness, we share the percentage of male and female claims in each of the categories: cancer (29.8% male versus 37.3% female), cardiac and cardiovascular diseases and disorders (25.9% v 18.3%), respiratory disorders (7.5% v 7%), strokes (5.5% v 5.7%) and traumatic injuries (5.4% v 4.3). Overall, the insurer saw an increase in cancer and cardiovascular claims but a decrease in respiratory disorders, which may be considered a slight return to pre-pandemic norms, specifically in critical illness claims. 

Sudden and unexpected

Over the past few weeks, your writer has interacted with an alarming number of individuals who have received bad news on the cancer front; it is a disease affects all of us, striking suddenly and unexpectedly. The insurer revealed the top five cancer-related claims categories as breast (25.6%); prostate (18.3%); skin (12.4%); colon (9.4%); and leukaemia (4.1%). Together these cancers made up over two thirds of all cancer claims in the 2023 year. “The most prevalent form of cancer was breast cancer, which accounted for 25.6% of all claims and 54.2% of all cancer-related claims for women; for men, 34.7% of all cancer claims were related to prostate cancer,” wrote Liberty, in their post-presentation media commentary.

 The increase in cancer claims should be strong motivation for your clients to remain on cover. Acknowledging the financial strain that many households find themselves under, Mark Barberini, Head of Comprehensive Life Solutions at Liberty, encouraged South Africans to seek financial advice to find the best way to remain insured to protect against further setbacks. “An unexpected diagnosis can have a huge knock-on effect on your finances, [made worse] if you no longer have the necessary cover in place,” he said. From a financial advice perspective, your job is to ensure that clients are both adequately covered and informed of what they are covered for. 

Mental health and suicide concerns

There were some trend shifts under the mental health heading. According to the insurer, its mental disorder-related claims experience stabilised in 2023, though suicides still make up the majority of these types of claims at 58%. The next biggest claims cause in this area were depression and anxiety (17.7%) and dementia (12.5%). For some additional context, suicides made up 2.6% of all life protection claims, providing a pay out on the individual’s death. However, clients who were unable to work due to a debilitating mental illness such as depression and anxiety made up 6.9% of all income protection claims. 

“We saw a big uptick in suicide claims in 2021 specifically related to the pandemic, and we saw a slow increase in income protection claims thereafter due to clients being unable to go to work due to anxiety and depression,” Crotty said. “And we saw a worrying trend of that going each year after COVID”. He noted that although the trend had stabilised in the latest year, mental health related claims remained a worrying trend in South Africa and across the world. 

Dr Reinhardt Erasmus, the insurer’s chief medical officer, cited a British Journal of Psychiatry article that shows common mental health illnesses have increased three to seven-fold worldwide since the pandemic, and that the current lifetime prevalence of having a mental disorder in South Africa was 30%. 

Decline rates always concerning, but…

The slide that often gets the media all riled up is the one dealing with decline rates. According to the insurer, 62 in every 1000 claims submitted to its retail business were not paid for various reasons. These include ‘does not meet criteria’ at 4.4%; ‘condition not covered’ at 1.1%; and non-disclosure, at just 0.3%. Liberty credits the long-term improvement in non-disclosure decline rates to the knowledge and support of its partnered financial advisers. 

We conclude this newsletter with a reminder about the value of life insurance in your client’s hands. It is a one-liner offered up by Crotty in the opening minutes of his media presentation. “These claim statistics are all about our promises fulfilled; they are about every single client who goes through that moment of extreme human vulnerability when they get a diagnosis of a cancer, or they lose a loved one who they are dependent on,” he said. “This is the reason why life insurance exists”. 

Writer’s thoughts:

During tough economic times, households often turn to their insurance covers and investments to find ways to cut expenses. Are you struggling to convince your clients to keep their life covers in place, or is it an easy sell? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.

Comment on this post

Name*
Email Address*
Comment
Security Check *
   
Quick Polls

QUESTION

SA’s 2025 Budget appears unlikely to introduce major tax hikes, but bracket creep, fiscal debt, and policy uncertainty remain key concerns. What will have the biggest impact on financial planning after the budget?

ANSWER

Bracket creep
Government debt
Laffer Curve effects
Policy uncertainty
fanews magazine
FAnews February 2025 Get the latest issue of FAnews

This month's headlines

Unseen risks: insuring against the impact of AI gone wrong
Machine vs human: finding the balance
Is embedded insurance the end of traditional broker channels?
Client aspirations take centre stage as advisers rethink retirement planning
Maximise TFSA contributions before year-end
Subscribe now