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The trends and effects of AIDS on group life cover

01 August 2013 Neil Parkin, Old Mutual

Retirement funds are facing growing governance requirements and uncertainty due to pending legislative reform, and risk cover is a key consideration in this shifting environment.

Discussing the changing face of major diseases such as AIDS in the context of its effects on group life cover, is imperative in accurately planning and determining costs in the underwriting and claims processes.

AIDS effect on Africa

The Medical Research Council’s (MRC) latest Rapid Mortality Surveillance Report shows that South Africans’ life expectancy at birth has increased from 56.5 years in 2009 to 60 years in 2011. In 2005 the MRC estimated that half of 15 year olds would die before reaching age 60. In 2011 this reduced to 40%.

The 2012 UNAIDS Global Report provides further support for this. They estimate that sub-Saharan Africa has seen a 25% reduction in new HIV infections in 2011 compared with 2001. In keeping with this, the number of AIDS deaths has reduced by 32% since 2005.

Research across a number of our large employers and retirement funds also suggest the reduction in the mortality rate. Our high level analysis showed that since 2008, there has been a 20% reduction in the mortality rate across clients.



Healthcare factors

Because AIDS is not generally recorded as a cause of death, it is difficult to know whether a reduction in AIDS deaths is driving this trend, but it does seem most likely. Increased access to antiretrovirals, as well as changing protocols for earlier treatment, is also undoubtedly changing the war against the disease. As a result, AIDS is changing from a certain death sentence to a chronic and manageable condition.

This is a major change in the way AIDS claims are both managed from an insurance perspective, and the expectation around their ability to be reintegrated into the workplace
If the above all bears true, then we should continue to see fewer deaths and with it, lower group risk premiums for affected clients. The extent of the reduction naturally depends on how AIDS currently affects the group (e.g. Western Cape companies may not see a decrease), and how the disease is managed within the workforce. If the above all bears true, then we should continue to see fewer deaths and with it, lower group risk premiums for affected clients. The extent of the reduction naturally depends on how AIDS currently affects the group (e.g. Western Cape companies may not see a decrease), and how the disease is managed within the workforce.

Group re-evaluation

A reduction in group life premiums is an opportunity to re-evaluate a group’s disability needs. The focus on death cover, and the rising costs of that cover, has diverted focus and money from disability insurance.

Disability insurance has evolved over the past decade, and there are a number of new generation products available, such as Old Mutual’s full salary replacement for the entire duration of a claim.

This is especially important given that while deaths are decreasing, disability claims due to AIDS have been increasing steadily. In 2001 only 1% of Old Mutual’s group disability claims were due to AIDS. By 2013 this figure has increased to 14%.

While AIDS is evolving into a manageable condition, another silent epidemic is exerting an increasing influence on mortality and health. Once considered a high-income problem, obesity is on the rise in low and middle income countries. In South Africa it has reached epidemic proportions, and according to the World Health Organisation 2013 stats, worldwide obesity has nearly doubled since 1980.

An estimated 10% of the world adult population is obese. The global reach of obesity becomes evident when one considers that 34 million people are HIV positive.
 
Obesity is a risk because of the life threatening conditions associated with it. This includes heart disease, high blood pressure, high cholesterol, cancer and type two diabetes. These conditions are responsible for 2.8 million deaths globally per year. To put this in perspective, 1.7 million deaths annually are thought to be due to AIDS.
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