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Life insurers step up for brokers’ clients

03 June 2021 Gareth Stokes

The claims statistics published by South Africa’s largest life insurers give a clear indication of the impact of Covid-19 on the sector; but represent the ‘tip of the iceberg’ insofar the total claims the industry will entertain over the next three years. Liberty Life, which hosted a 2020 Claims Statistics webinar said it paid out R12.4 billion “across the South African life / risk business” in 2020. And Old Mutual made pay-outs totalling R14 billion to meet its underwritten, non-underwritten and corporate claims, representing a 24% increase on its 2019 experience.

It can be challenging reporting on the claims statistics published by life insurers and care must be taken to distinguish between divisions and product types within each group. Kresantha Pillay, Lead Specialist: Lifestyle Protector at Liberty Group, said that Liberty had paid R6.34 billion in claims in the period under review, including R4.74 billion in life protection claims; R848 million in lifestyle protection claims; R522 million in lump-sum income protection pay-outs; and R231 million in monthly income protection pay-outs. Old Mutual, meanwhile, offered a breakdown of its underwritten claims experience. The overall amount paid reached R6.48 billion and comprising R5.17 billion in death claims; R871 million in illness claims; R436 million in disability claims; and R13 million in retrenchment cover. 

The main causes of death claims…

Old Mutual said that cancer and tumours (23%), cardiovascular diseases (19%) and accidental death (19%) remained the top three causes of death claims paid. “There was a sharp (60%) rise in the number of claims for respiratory system disorders under death cover, which was mostly attributed to widespread Covid-19 infections,” said John Kotze, Retail Protection Product Head at Old Mutual, in a media release accompanying the insurer’s 2020 claims experience report. “A positive impact of the pandemic was the 27% decrease in the number of motor vehicle accident death claims, probably due to the extended periods of restricted travel during lockdown”. 

Liberty reported the top three claims categories across the risk business for men as cancer and leukaemia (25%); cardiac and cardiovascular system (24%); and trauma (7%). For woman, the top three included cancer and leukaemia (31%); retrenchment (14%); and cardiac and cardiovascular system (11%). The group also reported a counterintuitive increase in the overall proportion of death claims due to trauma in 2020, compared to 2019. 

The impact of pandemic on life and income protection claims

The country’s life insurers attempted to quantify the portion of their claims pay-outs that were directly attributable to the Covid-19 pandemic; but admitted that there might be significant underreporting due to inaccurate cause of death information. “Many cause of deaths were listed as natural or undisclosed and it is likely that some of these were Covid claims; this points to a probable underreporting of Covid-19 claims,” said Pillay, who reminded the audience that the 2020 statistics, for the most part, reflected the impact of the first wave of pandemic. 

Anecdotal evidence of the impact of pandemic comes courtesy the 61% increase in the value of underwritten claims paid by Old Mutual due to respiratory system disorders in 2020 compared to 2019. The effects of pandemic also came through in the group’s disability cover category, where sickness income cover claims increased 3.5 times year-on-year. The highest cause of claims in this category was listed as ‘infectious diseases’ which is the descriptor Old Mutual would have used for claimants infected by Covid-19. 2020 was the first time in the insurer’s history that the category reached double digits. There was also a 25% increase in group’s total pay-out amount for disability income claims in 2020 compared to 2019. 

Momentum Myriad says that it had paid 463 Covd-19 related death claims to the value of R750 million by end-February 2021. The insurer also paid out 570 Covid-19 related income protection claims, with a total value north of R10 million to the same date. Momentum’s largest death claim pay-out was for an amount of R77 million for a client in his mid-60s who contracted the disease a mere 18-days after policy inception. 

A consistent ‘age and gender’ mortality experience

The age and gender statistics for Momentum’s claims reflect the global consensus that men have a worse morbidity and mortality outcome following Covid-19 infection than women, and that outcomes worsen with age. Momentum’s Coivd-19 death claims were split 71% male / 29% female, while claimants aged between 40 and 59 accounted for 33% of the claims and those aged between 60 and 79 years, 58%. Liberty also observed that its claims statistics supported the well-documented evidence that males were more affected by Covid-19 than females, across all age groups. They paid 397 Covid-19 related claims totalling R572 million with a further 183 funeral claims adding R2.5 million. 

Most insurers saw a big spike in retrenchment-related claims through 2020. “We saw a significant increase in the proportion of retrenchment claims, from 4.6% in 2019 to 9.2% in 2020,” said Pillay. She added that more women than men were affected, partly due to the higher percentage of women employed in the worst-affected hotels and tourism and food and beverages industries. The majority of the Liberty’s retrenchment claims were processed between August and October 2020, mostly for insureds in the 35 to 44 year age group. Old Mutual said it experienced a R3 million increase in retrenchment claims and a 30% increase in the value of total claims in this category, compared to 2019. “This is undoubtedly a consequence of lockdown, which caused many people to lose their jobs,” said Kotze. Within this category, just over a third of claimants were between the ages of 30 and 40, and 76% were male. 

Pandemic and life risk pricing

Liberty said that its pandemic experience was not likely to cause pricing pressures in its retail life business at this early stage; but admitted that there were pressures in the corporate segment. “We are monitoring the retail life claims experience on an ongoing basis and will make changes if our long-term view changes,” said Liberty Divisional Executive: Retail Solutions, Nalen Naidoo, Divisional Executive: Shared Value Retail Solutions at Liberty Group. “We are already communicating certain changes to our corporate clients and advisers”. 

The full impact of pandemic on life insurers will take years to filter through, especially given that South Africa remains largely unvaccinated and almost certainly faces a third wave of Covid-19 infections. “While 2020 has given us deeper insight into the impacts of the pandemic on our customers and the insurance industry, we are certain that the longer-term implications will become more apparent over the next few years,” concluded Kotze. “We will continue to adapt and evolve our protection solutions to meet the changing needs of our customers.” 

There are also concerns about what lies in wait in 2021 and 2022 due to the expected surge in post-pandemic disability and mental illness claims. “Mental health was a pandemic before the pandemic; the insurance industry has faced a tsunami of mental health issues over the last decade,” said Dr Dominique Stott, Chief Medical Officer at Liberty. “The so-called long Covid-19 effects could have an impact on physical wellbeing and a knock on effect on emotional wellbeing for years to come”. 

The human touch of financial advice

The human touch offered by South Africa’s brokers and financial advisers has assisted many clients during pandemic. “If it was not for the financial planning discipline and our dedicated advisers and brokers, nothing we saw today would have been possible,” said Irvin Tsimane, Manager Sales and Support, New Strategic Markets Management at Liberty “Proper financial planning unlocks the door that leads to the conversation we are having today”. He urged financial advisers to interact frequently with clients and assist them in dealing with the anxiety and stress in addition to assisting with their holistic financial planning needs. 

Brokers and financial advisers wear many hats, starting with pure financial advice and extending to conducting regular check-ins with clients to ensure that they are managing the turbulence of their day-to-day lives. The final word to consumers, courtesy Kotze, is to make sure that your families are adequately protected following death, disability or severe illness events: “For those more fortunate, and with the means, but without the necessary protection cover yet in place, the 2020 claims statistics are a rallying call to speak to a financial adviser today”. 

Writer’s thoughts:
One of the key differentiators between direct and traditional insurance distribution is that clients can turn to their financial adviser at their time of greatest need. We would love for you to share some of the human stories that emerged during the pandemic, to illustrate the value of the financial adviser beyond drawing up financial plans and recommending financial products that ‘fit’ these plans. Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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