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Claims and Covid: how the first, second and third waves have impacted the insurance industry

10 September 2021 MiWayLife

Insurance companies are emerging from the third wave which steamrolled through South Africa.

According to Craig Baker, CEO of MiWayLife, the effects of the first and second waves were clearly evident. Claims related to Covid spiked in June, July and August 2020. Although these decreased a little once the first wave subsided, there was another significant rise in claims related to the disease in January, around the time of the second wave. It is expected that in the weeks which follows the subsiding of the current third wave we will see another increase in death claims.

Linked to this, the organisation has also seen an increase in additional funeral claims, which rose by as much as 100% from April this year.

Moreover, according to information released by the Association for Savings and Investment South Africa (ASISA), as many as 1 023 083 policyholders passed away during the past year – an increase of 309 733 people during the previous 12-month period. Beneficiaries of these policyholders have been paid out R47.58 billion in death benefits; 56% more than the R29.08 billion paid the previous year.

The increase in claims related to Covid-19 stands in stark contrast to claims related to other conditions. Claims for asthma, bronchopneumonia, cardiorespiratory attacks and chronic obstructive pulmonary disease have all decreased significantly since 2019, for example. We still do not know how much in the way of chronic conditions and dread disease is going undetected due to the fact that Covid-19 has impacted routine screening.

These changing trends point to the fact that the insurance industry must be prepared for change, according to Baker. He says that it is important that medical underwriters be prepared to adjust for new disease, as well as new conditions that arise (directly and indirectly) from these diseases.

But, if there are implications for underwriters, consumers must also be prepared to adjust to changes where necessary. For example, Baker says that although there may not be any amendments to underwriting questions, consumers must accept that minimum waiting periods or premium increases may be included on some risk covers where the underwriters are unsure of certain conditions. In fact we have seen some insurers take a strong stand on things like vaccinations.

The upshot? “There is no time like right now to buy cover, as the price will be in line with our current knowledge. Rather be able to reassess your cover if you no longer need it, or if you need less cover, than be in a position where you cannot buy it or buy more of it when you need it most.”

Baker says it is important to keep this in mind, as insurers may have to make adjustments as they seek to manage risk and solvency on their insurance book. The industry has already seen what can happen when last year, some top players in the industry made a loss when just one year earlier, they had generated billions in profit.

Industry players also reported significant increases in claims related to respiratory illness and retrenchment which far exceed typical year on year increases. In some cases, claims related to deaths caused by respiratory illness tripled during the first wave. Sickness income cover claims also tripled, showing as double digits for the first time.

Although it will take some time for the effects of the vaccine rollout to mitigate the impacts of the Covid waves, Baker is anticipating similar trends in claim numbers for the third wave and as the South African adult population mulls over whether to vaccinate or not.

“Again, the best way consumers can arm themselves against any changes which occur as the industry tries to protect itself is by purchasing adequate cover now,” he reiterates.

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