The only control you have over risk is insurance
Every year thousands of South Africans die due to injuries sustained in motor vehicle accidents or from one of the four dread diseases: heart attack, coronary artery disease, stroke and cancer. These individuals are often heads of households who leave their surviving spouses and children with limited financial means. An accident or illness is something outside of your client’s control, while life, disability and dread disease cover are choices – with your assistance – they can freely make. An essential part of the financial planning process is to make sure the necessary risk covers are in place to protect dependants should an unfortunate event come to pass.
Life insurers bank billions of rand in risk cover premium each year. But they pay out much of this cash to compensate the insured (and their families) for a range of unforeseen death and disability events. “Through 2010 Liberty paid out R2.57 billion in risk claims,” says Nicholas van der Nest, Divisional Director of Risk Products at Liberty Retail SA. “Death claims contributed most to the claims paid last year, with a total claim value of R1.98 billion.” The group also paid out lump sum disability claims (R270.5 million), dread disease claims (R281.2 million) and income disability claims (R41.4 million). The income disability total includes premiums waived and any payments triggered by the product’s overhead expense benefit. The latest numbers are slightly up on those recorded in the previous year. Through 2009 Liberty Life paid out R2.217 billion, split to death (R1.738 billion), lump sum disability (R203.2 million), dread disease (R235.4 million) and income disability (R40.8 million).
Risk cover when you need it most
Risk insurance protects the insured against uncertain and unexpected future events. You should frequently review your client’s risk covers because you never know when they may suffer a death, disability or dread disease event. To illustrate, Liberty Life made a number of large claims payouts in the 2010 calendar year just months after the insured went “on cover”. The largest single payout was R20 million for a death due to respiratory failure which occurred nine months after the inception of the policy. A R10 million claim for death due to major burns was received three months after policy inception. A R6.6 million claim for a cardiac arrest event was on cover for just one year before the claim was submitted. And a motor vehicle accident death claim of R3.2 million was submitted after just 26 days “on cover”.
Beware bike! The reason behind the sign
Liberty Life notes that the number of deaths in motor vehicle and motor bike accidents has increased substantially in 2010. Last year 22% of death claims were motor vehicle accident-related. According to the Road Traffic Management Corporation (RTMC), over the Easter weekend alone 151 people died, while recent figures from the Department of Transport confirm that 1,000 people die on South Africa’s roads every month.
But a close look at Liberty Life’s 2010 claims statistics shows that illness remains the leading cause of death locally. Cancer accounted for the bulk of the group’s death claims at 23%, followed by the dreaded cardiovascular and stroke categories, which accounted for 18% and 4% respectively, and renal and respiratory failure at 4% each. Suicide-related death claims – 6% of total death claims paid – were also quite high for 2010 “The high number of suicides can potentially be linked to the tough economic situation in South Africa during the past three years,” says Van der Nest. “Statistics released by the South African Depression and Anxiety Group point to an average suicide rate if 17.2 per 100 000, or 8% of all deaths!” Trauma (8%), pneumonia (3%) and other (9%) complete the 2010 claims picture.
Keeping the insured in the loop
The life insurance industry is often criticised for its lack of transparency. An open policy on claims statistics is valuable as it allows financial intermediaries and their clients to access useful annual claims information. Liberty Life was the first local life insurer to publish claims figures. “We publish our claims figures to be transparent and demonstrate our commitment to treating customers fairly by paying all valid claims,” says Van der Nest. “Consumers should be with an insurer with a sound record and a solid history of paying out when they need it most.”
Editor’s thoughts: We welcome transparency from the life industry – and it is useful knowing how much each insurer paid to its claimants in a given period. But perhaps a more meaningful statistic would be the value or percentage of claims refused, plus reasons for these decisions. Would you welcome life industry statistics on claims refused, with reasons? Please add your comment below, or send it to [email protected]
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