The 2019 annual death claim benefit statistics for fully underwritten individual life policies, released last week by the Association for Savings and Investment South Africa (ASISA), show that life insurers received 27 547 claims and paid 27 304 claims, representing 99% of claims received, down 0.7% from 2018. Life insurers declined 243 claims, which represent only 1% of claims against underwritten individual life policies in 2019. In 2018, life insurers declined 222 claims, 0.7% of claims against underwritten individual life policies.
Fully underwritten life policies are only issued if the individual policyholder has participated in a full underwriting process, which involves a comprehensive assessment of the life insured’s health and medical history.
Rosemary Lightbody, senior policy adviser at ASISA, comments that while the number of claims received in 2019 has been the lowest since 2012 when ASISA started consolidating statistics for fully underwritten individual life policies, the value of claims paid has more than doubled from R6.8 billion to R16.7 billion.
|Year||% of claims paid||Number of claims paid||Rand value|
|2012||99%||34 724||R6.8 billion|
|2013||98.9%||36 199||R8.4 billion|
|2014||98.9%||36 421||R10.3 billion|
|2015||98.9%||35 983||R12.3 billion|
|2016||99.3%||35 347||R13.1 billion|
|2017||99.3%||34 100||R14.4 billion|
|2018||99.3%||33 545||R15.1 billion|
|2019||99%||27 304||R16.7 billion|
But why are claims declined?
Death claims will always be paid by insurers, provided the claim is not fraudulent and the policyholder did not commit suicide within the first two years of taking out the policy, did not withhold important information from the insurer when applying for the policy or die as a result of an exclusion.
Interestingly, Lightbody points out that most claims were rejected by life insurers due to non-disclosure of material information, which involves an act of dishonesty on the part of policyholders. Non-disclosure also increased from 2018 to 2019.
She highlights that it is critically important for consumers to understand the potentially devastating financial consequences for their families of not honestly disclosing important information such as any lifestyle or health related detail that could materially affect the terms of the policy. “If you cannot remember the exact technical details of a health event, like the medical diagnosis, then mention the year, the name of the doctor involved, and more or less what was wrong. In such a case the insurer can then obtain more detailed information from the relevant health care provider,” she advises.
|Reasons why claims were declined||Number of claims declined in 2019||Number of claims declined in 2018|
|Non-disclosure||145 out of 243||123 out of 222|
|Client specific underwriting exclusions||31 out of 243||18 out of 222|
|Suicide||40 out of 243||45 out of 222|
|Fraud||27 out of 243||36 out of 222|
One can expect a rather dramatic increase in claims in 2020 as a result of Covid-19. At the same time, the figures mentioned above provide valuable “skietgoed” to stress the importance of life cover as part of one’s financial planning. Chatting to an old-timer in the industry, we spoke about how people were reluctant to take out life cover until it was too late. He said his response was usually: “I have never, in my whole career, come across a widow who complained that her husband was over-insured.”
Click here to download the ASISA media release.