Category Life Insurance

Total death, disability, illness claims 30% lower

18 May 2023 Gareth Stokes

One of South Africa’s largest life insurers has confirmed a marked improvement in its claims pay-out statistic for 2022, with a 31% decrease in the value of claims paid. Liberty made claims pay-outs totalling ZAR6.98 billion to around 31 808 individuals and their beneficiaries in the year, or 31% less than in 2021 when the COVID-19 pandemic was still in play.

Far fewer COVID-19 death claims

In a media statement accompanying its Claim Stats Overview 2022, the insurer attributed the reduction in claims to the disappearance of pandemic-related death claims. Liberty paid out ZAR3.14 billion for 1 058 COVID-19 related death claims in 2021; in 2022 there were only 191 comparable claims. “The significant reduction in COVID-19 related claims signals that the worst of the pandemic is over, however secondary effects of the pandemic have emerged in the form of chronic illnesses,” explained David Jewell, Executive for Retail Solutions at Liberty. He warned, however, that the long-term effects of the pandemic would take many years to work their way through insurers’ claims experiences. 

As the pandemic influence wanes, the long-term death, disability and severe illness claims categories are returning to trend. Based on their 2022 claims experience, Liberty summarised the top five contributors to personal risk cover claims as cancer (28.8%); cardiovascular disease and disorders (22.4%); respiratory disorders (11.9%); stroke (6.5%); and renal disorders (5.9%). “Cancer and cardiovascular diseases remain significant and give us an indication of the challenges that continue to face society; the importance of being insured against these risks cannot be understated," said Dr Dominique Stott, Liberty’s Chief Medical Officer. 

The main ‘primary cause of claim’ categories is identical for male and female insureds, although the percentage of cancer claims was much higher among women claimants. For men, 24.7% of claims paid were for cancer, with around one-in-three of those claims being for prostate cancer. For women, an alarming 37% of claims were for cancer, with half being due to breast cancer. According to liberty, this highlights the need for regular preventative check-ups and the need for women to have adequate cover, specifically for the diagnosis of a critical illness. Thanks to technology, life insurers can offer incredibly granularity in reporting, as is the case with Liberty’s deep dive into the cancer and cardiac-related claims. 

Breaking down cancer and cardiac claims

Breast cancer accounted for 25.5% of all cancer claims paid, followed by prostate cancer at 15.8%; skin cancer at 11.6%; colon and rectal cancer at 9%; and brain cancer at 4.3%. Moving to cardiac-related claims, the insurer reported 42.3% of pay-outs for coronary artery disease; 21.6% for heart attack; 11.1% for carotid arterial disease; 9.6% for arrhythmia; and 5.9% for cardiomyopathy. PS, having recently attended the two-day-long Insurance Crime Bureau (ICB) Annual Conference, this writer has a new-found respect for the doctors and / or coroners who have to sign off on the cause of death that must accompany life insurance claims, though one assumes in most of these cases the insured has a long diagnosis and treatment history. 

It was interesting to unpack the mental health claims experience in the context of the opening remarks re the long-term impact of pandemic. Liberty said: “The ever-increasing mental health impact of the pandemic continues to be reflected through the mental health claims seen, with suicide claims making up half of the claims attributed to mental health while depression and anxiety make up 16%”. There was some good news, being that the 2022 suicide claims were lower as measured as a proportion of total claims in the prior year. 

Liberty has, however, seen an increase in the proportion of claims related to mental illness on their income protection category. Claims in this category are submitted by individuals who are unable to work for short periods of time due to mental illness. “While we are seeing a considerable reduction in COVID-19 cases, the long-term effects of the pandemic will remain with us for a while and this inevitably includes mental health issues,” commented Dr Stott. It is also possible to study certain economic impacts of the pandemic using insurer statistics, as evidenced by Liberty’s retrenchment pay-out experience. 

Spike in retrenchments as lacklustre economy ‘bites’

The number of retrenchment claims were down in 2022 compared to 2021, and accounted for some 4% of all claims. Gauteng made up for more than half of all retrenchment claims with other economic hubs like KwaZulu-Natal and the Western Cape accounting for the bulk of the remaining claims. “A high proportion of retrenchment claims were in the 35-44 age bracket, essentially among mid-life professionals,” said Tom Crotty, Lead Specialist, Technical Marketing: Risk Proposition Management at Liberty. He observed that the impact of the subdued economy combined with further economic stress brought on by loadshedding was affecting businesses across the country, leading to job losses in the aforementioned age band. 

Finally, Liberty offered some statistics on levels of insurance across genders. The insurer pointed out that its 2022 claims gender split confirmed the Association for Savings and Investment South Africa’s findings that women are marginally less covered than men for both death and disability events. In terms of gender, 68% of claims paid for death, disability and critical illness were from men, perhaps reflecting the historic gender skew towards men as breadwinners and household financial decision makers. Again, some good news, is that the gap is noticeably narrower in younger age groups. “Changing societal norms signal a pressing need for women to prioritise life insurance in order to help protect themselves and their children,” said Kedibone Chuene, Chief Specialist Risk Proposition Management at the insurer. 

With thanks to SA’s financial advisers

Overall, 94.8% of claims submitted were paid in 2022, marking an increase in payments from the previous year. Claims that were not paid were a result of factors such as claims being submitted for disease conditions that were not covered in the critical illness policy, or where the claims did not meet the benefit criteria. “We are seeing the positive impact of more claims that were paid out because of full disclosure and transparency in the application process,” said Jewell. He commended financial advisers for their role in helping clients make full and complete disclosures when buying cover. 

This newsletter concludes with an observation from Liberty’s Claim Stats Overview 2022 on the value of financial advice and insurance. They wrote: “While some of the 2022 insights show concerning trends, they also demonstrate the value of life insurance and the importance of comprehensive financial planning to manage life’s unforeseen events”. 

Writer’s thoughts:

The World Health Organisation recently announced that COVID-19 was no longer considered a health emergency, and the latest life insurer statistics seem to confirm this. Have you noticed any change in client interactions on death, disability and severe illness cover in the context of a post-pandemic world? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts



Added by Gareth Stokes, 27 May 2023
Thanks for your comment @Diek Muller. Agree, it is difficult for financial / risk advisers to keep up with insurers' responses to the dynamic insurance environment. Unfortunately, its part of the job - you have to keep a close eye on things!
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Added by Diek Muller, 21 May 2023
It is a petty thst some providers are now using these stats to alter their mistakes. Resently ine provider announced 23% rate increases plus reduction in the garanteed period and 23% reduction in the 100% cashback. No advisor is trained on these changes and providers keep this close to their cest to ensure they can get away from their responsibilities.
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