Financial advisers may need to reconsider where income protection sits in their clients’ financial plans. According to Bidvest Life’s 2024 Claims Report, clients were 15 times more likely to claim on income protection benefits than on death benefits, and 43 times more likely to claim for income protection than for permanent disability.
Presenting the findings to advisers last week, Bidvest Life’s product and pricing executive, Nic Smit (pictured), said a financial plan that is not built around income protection “doesn’t necessarily reflect clients’ most common risk they face: the loss of income due to illness or injury”.
Claim trends
The report shows that younger South Africans drove nearly half of income protection claims, while death claims were concentrated among older clients.
- Clients under 40 accounted for 47% of income protection claims but only 4% of death claims.
- Women made up 51% of income protection claims, compared with 31% of death cover claims.
- The average claim duration was 71 days, with 52% of claimants having claimed previously.
- Event-based cover accounted for more than 10% of all income protection claims – its highest proportion since launch.
- 4% of all unique income protection claims were paid.
Smit said an advice process that is not around income protection “can miss the mark for younger clients, because it doesn’t address the most common risk they face: the loss of income due to illness or injury”.
In 2024, 36% of Bidvest Life’s income protection claims came from clients aged 30 to 39, while 11% were from those under 30. Together, these age bands represented only 4% of death claims. The youngest claimant was a 19-year-old student who claimed for two weeks because of a minor infection, while the oldest was a 69-year-old doctor who claimed for a wrist injury.
“Your client’s income is their most valuable asset. It funds everything else: food, housing, their children’s education, and their ability to keep contributing to their investments and retirement savings. Without income protection, the rest of their financial plan could be at risk,” Smit said.
Disability and critical illness interactions
The claims data also illustrates the limitations of relying solely on lump-sum disability or critical illness benefits.
- 36% of extended income protection claims were for non-permanent conditions that would not have qualified under lump-sum disability definitions.
- Critical illness income enhanced traditional critical illness cover by paying up to 130% of the insured’s income protection benefit for up to 12 months, regardless of whether the client was able to work.
“CI income shifts the claims experience completely,” said Smit. “Instead of managing multiple fragmented claims over months of intermittent treatment, clients have upfront certainty and additional income to cover medical and other unexpected expenses.”
Claims efficiency
In 2024, 90.4% of all unique income protection claims lodged were paid. The primary reason for non-payment was clients attempting to claim during their waiting period – an aspect advisers should discuss carefully when structuring policies.
“Speed is critical when a client can’t earn,” Smit noted. “In 2024, our fastest income protection claim was processed in just 80 minutes. Four percent of claims were paid within 24 hours, 33% within a week, 48% within two weeks, and 74% within one month.”
The insurer’s fast-track criterion, which allows claims to be paid without occupational assessment for predefined events, applied to 82% of income protection claims.
The leading claims event for fast-track procedures was hysterectomies; cancer was the leading condition; fractured ribs were the most claimed-for injury; and minor infections that didn’t require hospitalisation topped the list of fast-track sick notes.
“Our 2024 claims report reinforces that income first is a proven way to deliver better outcomes for advisers and their clients,” Smit said.
