Category Life Insurance

From twin peaks to flatline, a close look at SA’s death claims statistics

07 December 2022 Gareth Stokes

The mortality statistics offered up by South Africa’s largest life insurers give unique insights into the path of the COVID-19 pandemic, starkly contrasting the twin peaks of pandemic-related death claims recorded in January and July 2021, to the zero claims in August 2022. The Death Claims Dashboard is maintained by the Continuous Statistical Investigation (CSI) Committee of the Actuarial Society of South Africa (ASSA) to record death claims against fully underwritten life policies at the country’s five largest life insurers. According to this dashboard, around 4 706 of the 31 520 fully underwritten death claims received by these insurers between March 2020 and August 2022 were due to confirmed COVID deaths.

Death claim definitions and disclaimers

The ASSA defines fully underwritten life policies as those “issued to policyholders who have participated in a comprehensive medical and lifestyle assessment, which enables the life insurer to determine the level of risk” presented by the insured life. As such, the dashboard does not include statistics for older policies like universal life policies and limited underwriting policies such as credit life policies and funeral policies. The society also warned that the actual number of pandemic-related deaths were likely higher than reported. According to Anja Kuys, chair of the ASSA CSI committee, the actual number of COVID deaths was difficult to confirm due to claim forms generally not specifying the disease as the cause of death. In most cases the forms only state whether the cause of death is natural or unnatural. 

Pre-pandemic, the five largest insurers expected between 600 and 700 claims against fully underwritten new generation life policies each month. But this number shot up from June 2020, peaking above 2 700 in January 2021 and again in July 2021. The good news is that life insurers’ mortality experiences are beginning to return to pre-pandemic levels. The dashboard shows that 617 death claims were received in August 2022, the lowest monthly total since April 2020, when 540 death claims were submitted. More importantly, the death claims for policyholders who died due to COVID started dropping to single-digit numbers from March 2022, reaching zero for the first time in August. “What is clear is that COVID-19 is no longer claiming as many lives as it did in 2020 and 2021,” noted Kuys. 

The twin peaks of excess deaths

A graph of insured death claims versus expected death claims revealed twin peaks of excess death in the aforementioned months, with the number of deaths gradually returning to trend during 2022. ASSA noted that over the two years of pandemic, starting March 2020, death claims against fully underwritten life policies exceeded the expected number by a significant margin. “However, since February this year, the additional death claims over and above the expected number started stabilising at between 10% and 20%,” said Kuys, before briefly commenting on the divergence between insurers’ experiences of pandemic and that of the South African Medical Research Council (SAMRC). 

“Differences in insured mortality compared to overall population mortality were present in South Africa even pre-COVID, because the average age of the insured population is higher than that of the overall South African population,” she explained. “The SAMRC statistics also include children, a population group that did not experience excess deaths during the pandemic”. ASSA was, however, surprised that the mortality rate for insured lives exceeded the expected death rate by such a large margin during the first three COVID-19 waves. The fact that the mortality rate of insureds appeared to be settling back in line with that of the general population post-pandemic was also noteworthy. The latter observation could relate to more of the insured population having received vaccines and boosters than the general population. These and other statistical anomalies highlight why it is important for life insurers to have access to credible statistics relating to the insured population, enabling them to make provisions for sufficient capital reserves and pricing. 

Trend analysis and other observations

The ASSA Death Claims Dashboard was designed to track excess death claims against fully underwritten new generation individual life policies due to COVID and to help life insurers with capital reserving and pricing. The five insurers that report into the dashboard represent around 85% of South African individual life insurance premiums, with just over two million fully underwritten life policies on their combined books. According to Kuys, there is value in maintaining the dashboard post-pandemic to identify other emerging trends. Examples of such trends is the steep drop in unnatural deaths during the country’s hard lockdown as well as the correlation between public holidays and school holidays and the number of unnatural deaths. Unnatural death claims remained lower than insurer expectations during 2022. 

“While this may be as a result of deaths that have not yet been reported, it could also be due to more people working from home,” said Kuys, who also observed that policyholders with fully underwritten life policies tended to fall into higher income groups with occupations that allowed for remote work. It was also possible to derive age- and gender-based statistics from the dashboard. Death claims by gender for the period March 2020 to August 2022 revealed that the two-to-one ratio between  male and females was maintained during pandemic. Insurers had expected 12 600 male deaths and 6 600 female deaths going into pandemic but received 20 900 and 10 620 claims respectively over the period. 

Age- and gender-based death claim ‘surprise’

“The dashboard shows that the death claims rate for males and females increased by the same percentage in line with the expectation that the death claims rate for male policyholders will be almost double that of female policyholders,” wrote the ASSA in their media release announcing the latest assessment of the death claims landscape. As for age, the conclusion appears to counter some common beliefs about the disease… According to Kuys, the impact of COVID-19 has been surprisingly similar across all age groups in that the number of claims has almost doubled for younger lives as well as for the older ages. 

Writer’s thoughts:

The life insurance sector continues to play an important role in insulating society from the impact of pandemic and other shock events. Has the industry’s performance through pandemic given you and your clients greater confidence in the life insurance sector, and do you believe that life insurance policies will perform regardless of the frequency and extent of external, unexpected shocks? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts

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