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The evolution of life covers for HIV sufferers

30 March 2007 Gareth Stokes

The prevalence of HIV / AIDS in South Africa is amongst the highest in any country in the world. Latest estimates suggest as many as five million people (including more than 13% of the adult population of the country) live with the virus. (Cick on the he

The consequences of becoming HIV positive go far beyond the social stigmas associated with the illness. The effect is far reaching and results in sufferers being unable to participate in the economy on equal footing with non sufferers. Nowhere is this disparity more evident than in the world of long-term insurance.

In the past, testing positive for HIV meant the sufferer was categorised as uninsurable. Without life insurance, the sufferer was denied access to housing finance due to the banks requirement for life insurance to cover outstanding bond amounts. The sufferer was also denied access to funeral cover and left unable to provide for the family at the time of passing.

Numbers not emotions hold sway

At a recent joint press conference held by the Life Offices' Association (LOA) and Aids Law Project (ALP), some insight was gained into the different views held by each of these bodies. On the one hand, the ALP views the matter on an emotional level focusing on the hardship caused by HIV / AIDS exclusions and policy refusals. On the other, the LOA adopts an actuarial stance, quoting the law which obliges insurance companies to maintain solvency.

Dr Pieter Coetzer, convenor of the LOA's Medical and Underwriting Committee offered an introduction to underwriting principles. Underwriting is a prognostic science which focuses on mortality. As it is impossible to predict the mortality of an individual person, underwriters focus on the average mortality rates for groups of people with similar risks. This concept is known as the risk pool concept.

Risk pools are established based on evidence gathered from various statistical sources. Individuals with the same risk profile are grouped together and the premiums applicable to each group are set using actuarial calculations. Individuals in groups with excess death rates then pay premiums which are higher than those paid by individuals in healthy groups.

New and old generation life-cover products

The reason existing cover for people living with HIV / AIDS is so expensive is that the risk pool is not large enough and the data on follow-up periods does not cover enough time to accurately assess the risk associated with the illness.

South Africa's HIV / AIDS problem is of such a nature that equivalent studies in other Western countries are of little use to local underwriters. Our uniqueness stems from the countrys relatively high infection rate, a high prevalence of type II HIV and the existence of co-morbidities such as TB and other negative socio-economic factors.

Old generation insurance products for HIV / AIDS sufferers were extremely expensive. These products were developed prior to the availability of ARV treatment and generally offered term cover. Insured amounts were limited to less than R500, 000 and annual premiums were renewable. Only stages I and II as defined by the World Health Organisation were covered.

With the advent of ARV treatment, insurers were able to offer new generation products at significantly reduced rates. Products provided life cover up to R2 million. The new generation products require constant medical monitoring and provide cover based on CD-4 counts and viral loads. Despite advances in treatment there are still only five products offered in this segment of the market.

Downward price trend

Old generation life insurance products were extremely expensive and cost between eight and nine times more than comparable cover for a non-HIV insured. Recent advances have made it possible to get this multiple down to four or five times the equivalent, which though still expensive, represents a significant improvement.

In order to bring the prices of these life insurance products down in an actuarially responsible manner, HIV / AIDS needs to be de-stigmatised. Treatment needs to be rolled out to more infected people and the outcomes of this treatment closely monitored.

As outcomes of HIV / AIDS treatments become clearer the industry will be able to provide new and innovative products at a lower cost. There are also indications that the range of products available to HIV positive individuals will increase markedly in coming months.

Editor's thoughts:
A lot has been written about HIV / AIDS exclusions in insurance policies. The life industry is changing in the face of fierce campaigning on behalf of HIV / AIDS sufferers. Are there other diseases and exclusions which cause similar hardships to your clients? Send your comments to
gareth@fanews.co.za.

 

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