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Long-term insurance statistics – Pay-outs again reflect the importance and value of what we do

Policyholders and beneficiaries received claims and benefit payments worth R522.7 billion from South African life insurers in 2020. According to the long-term insurance statistics released by the Association for Savings and Investment South Africa (ASISA) this represents an increase of R31.7 billion from the R491 billion injected into the economy in 2019 through payments made to policyholders and beneficiaries.

Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee, explains that the payments made to policyholders and beneficiaries included retirement annuity and endowment policy benefits as well as claims against life, disability, critical illness and income protection policies.

“For most of the recipients the payments would have been triggered either by a tragic life event like death or disability, or retirement. This means that more than half a trillion Rand was paid to consumers last year to provide financial stability in a time of great need as contractually agreed when the policy was first taken out.”

According to De Villiers the life industry recorded 434 216 death claims in 2020, a significant increase from the 317 442 claims received in 2019. More than half of the death claims in 2020 were for funeral policies (266 321) while the rest of the claims were for life policies, credit life policies and other policies that provide life cover. These claims align with the impact that the Covid-19 pandemic had on South Africa.

Most insurers in South Africa’s also reported large increases in their death claims, both for 2020 and the first few months of 2021:

  • Old Mutual reported that in the first two months of 2021 alone, it recorded some R1.9 billion in Covid-related mortality claims.
  • Momentum Metropolitan saw a 35% increase in death claims at its Momentum Corporate unit, which underwrites employee benefits – including death and disability insurance – for many SA companies
  • In Momentum’s retail life businesses, average death claims were 20% higher than in comparable periods.
  • Liberty reported an 11% increase in its total death and disability claims paid during 2020, which amounted to R11.7 billion.
  • Sanlam also reported that in 2020, death claims paid out amounted to about R531 million more than in 2019.

The health of the long-term insurance industry

De Villiers says the South African life insurance industry showcased its resilience in 2020 by completing a challenging year with more than double the legally required capital buffer in place.

The life insurance industry held assets of R3.23 trillion at the end of 2020, while liabilities amounted to R2.89 trillion. This left the industry with free assets of R333.5 billion, which is more than double the capital required by the Solvency Capital Requirements (SCR).

At the end of 2020, there were 40.4 million individual recurring premium policies and 2.8 million individual single premium policies in force.

Risk policies

  • 9 million new individual recurring premium risk policies (life, disability, dread disease and income protection cover) were bought in the 12 months to the end of December 2020, compared to 9.6 million in 2019.
  • As a result of financial intermediaries not considered an essential service during the hard lockdown there was a significant reduction in new business volumes for 2020, further impacted by reduced consumer spending power.
  • Furthermore, 10.2 million risk policies were also lapsed last year, compared to some 8.8 million risk policies lapsed in 2019 – an expected outcome of the Covid-19 lockdown period.

Savings policies

  • 543 561 individual recurring premium savings policies (endowments and retirement annuities) were taken out in the 12 months to the end of December 2020, compared to 773 078 in 2019. This again was the result of last year’s hard lockdown when financial intermediaries were not able to work, combined with tough economic conditions that impacted on consumers’ ability to save.
  • 663 597 recurring premium savings policies were surrendered in 2020, surprisingly lower than in 2019 when 713 361 savings policies were surrendered.
  • Single premium savings policies recorded an increase in new business in 2020, with 166 609 single premium savings policies were bought compared to 157 517 in 2019.
  • In the 12 months to the end of December 2020, some 97 497 single premium savings policies were surrendered, which is lower than the 107 224 surrendered in 2019.
  • The drop in the surrender of savings policies could be as a result of the assistance provided to more than 458 000 policyholders who had been in good standing with the insurer, but who were unable to pay their monthly premiums during the hard lockdown. Relief measures worth R1 billion included premium holidays on savings policies of three to six months.

Message to consumers

De Villiers acknowledges that the difficult environment facing consumers as a result of the Covid-19 pandemic is far from over. With an unemployment rate at record highs and retrenchments an ongoing reality for many sectors, consumers are likely to face financial hardship for many months and even years to come, he adds.

“Unfortunately, the true value of having in place long-term insurance cover is generally only realised during times of crises. Losing a second income when a family member dies, for example, can have a devastating financial impact on a family. For this reason, policyholders should do their level best to hold on to the risk cover that they have in place.”

The role of the financial adviser, to discuss potential solutions, is again highlighted by De Villiers.

Click here to download the ASISA media release.

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