Ray of hope as life claims pay-outs fall 31%
The best way to demonstrate the value of life insurance is where the proverbial ‘rubber hits the road’ at claims pay-out stage. Case in point, Momentum Retail Life Insurance’s 2022 claims statistics confirm that ZAR6.18 billion was pumped back into the domestic economy over the 12-months to 31 December 2022. This represents a 31% decrease from the previous year, showing the diminishing impact of COVID-related death claims on overall claim statistics.
Making on good on adviser, client promises
In a webinar presentation of its results, Dr Michael Moll, CEO of Truth TV, chatted to Momentum’s Head of Life Insurance Marketing, George Kolbe, and product development specialist, Sibusiso Khumalo. “Sharing these claims statistics with you offers proof that Momentum’s benefits and [advice and claims] processes work, and that the brand makes good on its promises to advisers, and that advisers in turn make to their clients,” Dr Moll said. He used his introduction to interrogate Kolbe on the total claims pay-outs made since the insure launched its Myriad offering. “We have paid out around about ZAR65 billion since inception in 2002; the magic, for us, [derives from] the difference that these amounts have made in the lives of our clients,” Kolbe said.
Another ‘big picture’ stat that was shared during the webinar was that around 93% of claims were paid, with seven-in-100 declines due to exclusions; non-disclosure at the underwriting stage, suicide within the first two years; or failure to meet the definition of a valid claim, to name a few. An interesting aside, is that more than 99% of mortality benefits were paid in 2022, indicating that claims rejections are more prevalent in morbidity type claims. These stats illustrate the important role that a life insurer’s underwriting team plays. “Underwriters are the gatekeepers for an insurer,” Kolbe said. “If they underwrite correctly there are fewer issues at claims stage”. Momentum revealed that its claims team finalised almost 9000 claims last year, paying out an average of ZAR25 million on each-and-every workday.
Three ‘Big Cs’ dominate the death claims experience
COVID-19 remains ‘top of mind’ among life insurers despite the disease having less of an impact on the annual death claims experience. To illustrate, Momentum said that COVID-related death claims had fallen from 42% of the death claims pay-out total in 2021 to just 12% of the total in 2022. The top three causes for death claims were cardiovascular events (31%), cancer (23%) and COVID (12%) with unnatural deaths (11%) creeping in at fourth place. “We still have COVID death claims coming through this year, though fewer than before,” Kolbe said. But improvement in pandemic-related death claims were marred by increases in unnatural death claims due to motor vehicle accidents, murder, suicide, and surgery-related deaths.
Momentum reported that motor vehicle accident-related death claims increased by 17%; murder by 72%; and deaths due to surgery, by 63% in 2022 compared to the prior year. Notably, among claimants under the age of 30-years, 67% of unnatural deaths were attributed to motor vehicle accidents! “Such a big increase in murder claims is also concerning; this could be a symptom of the unacceptably high murder rate in South Africa and, while our 2022 experience comes off a relatively low base, the increase is significant,” Kolbe said. The gender ‘skew’ in the 2022 death claims experience was 68% to men and 32% to women, with men also experiencing a higher rate of unnatural deaths.
Claims pay-outs by life insurance category
Overall, Momentum paid out just short of ZAR4 billion for mortality (death) claims in 2022, followed by ZAR750 million for critical illness claims; ZAR490 million on lump sum disability claims; and ZAR220 million for income protection claims. And readers will be staggered by the size of some of the pay-outs.
For example, the largest death claim topped ZAR84 million, though it is only the fourth largest in the insurer’s history. This pay-out was for a 67-year-old policyholder who passed away following a stroke. The largest death claim pay-out in the Namibian market was for just over N$18 million for a 48-year-old insured who passed away from Klebsiella Pneumonia. “Klebsiella is a bacterial pathogen that enters the body through airways, urinary tracts or wounds; it is a tough infection to treat and is really hard to get out of a patient’s system,” Dr Moll said.
The webinar covered some interesting aspects of the life insurer’s product offering, starting with the payment of terminal illness benefits. Momentum Life paid out 47 terminal illness claims in the period under review, though the number of claimants was lower due to some insureds having more than one policy. It also emerged that around 70% of critical illness-related death claimants did not have critical illness covers in place. “We have seen an increase in life cover only cases, which begs the question: do people understand the value of having critical illness cover?” Kolbe asked.
Unpacking the living benefits experience
Khumalo talked the audience through the so-called ‘living benefits’ side of the insurer’s 2022 experience. “Living benefits refer to any benefits that are paid whilst the client is still alive,” he said, before explaining a product feature known as ‘comprehensive living benefit’ which allows advisers and clients to plan for the overlapping nature of certain critical illness definitions and impairments.
According to the insurer, the largest disability claim lump sum pay-out in 2022 was to a male business owner in his 40s who went blind, totalling some ZAR16 million. The largest Namibia-based lump-sum disability claim pay-out was for around ZAR4.6 million made to a tour guide in his 50s. According to Khumalo, the leading causes for lump-sum disability pay-outs were cancer (25%), musculoskeletal illnesses (18%); and nervous system.
Although too early to call it a trend, the insurer observed a shift in the balance of permanent versus temporary income protection pay-outs. “In 2022, claims that were considered permanent in nature made up about 34% of all income protection claims; this was up from 21% in 2020 and 28% in 2021,” Khumalo said. He said that the insurer would monitor this ‘split’ closely in future periods. Dr Moll took this opportunity to ask whether lump-sum disability pay-outs were a better alternative than income replacement. “This is a difficult question, and one where the adviser and financial advice comes to the fore,” Khumalo said. “Advisers are very close to their clients, and they know exactly what the needs of their clients are”.
Strong pay-out track record ensures an edge
Once all is settled, a life insurer is measured by its claims pay-out track record. “We have a solid reputation of always looking for reasons to pay valid claims,” concluded Kolbe. “We know that every claim represents a family that has lost a loved one, or experienced the impact of illness or disability, and we are committed to doing everything we can to ease their financial burden during this difficult time”. For advisers, getting the right insurance cover in place is possibly the best thing they can do for their clients and their clients’ beneficiaries.
Writer’s thoughts:
One of the issues raised during Momentum Life’s 2022 claims report was that fewer clients are purchasing both mortality and morbidity cover. The preference, it seems, is for life cover only. Does this echo your experience, and why might this be? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
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