Life insurers may hike pricing

• White-collar disabilities related to lifestyle and stress up markedly

Life insurers were likely to increase pricing and possibly change benefit designs on group-income protection policies after a large number of claims in 2016, said Mark van der Watt, CEO of life insurance solutions at MMI.

Life insurers are likely to increase pricing and possibly change benefit designs on group-income protection policies following many claims in 2016, says Mark van der Watt, CEO of life insurance solutions at MMI.

“A number of competitors have reported losses on their [group-income protection] benefits,” Van der Watt said.

Income protection provides policyholders with regular income if they are unable to work due to injury or illness.

For the six months to December 2016, MMI’s corporate and public sector business posted a 29% decline in earnings to R280m, with disability experience alone contributing R64m to the drop.

The deterioration in claims experience was mainly due to poor economic conditions, Van der Watt said. Another looming problem was the marked increase in “white-collar disabilities”, which were related to lifestyle and stress.

“Given that this group generally have higher salaries, this inevitably leads to an overall increase in the average payout per claim,” he said.

“The tax-free nature of these higher benefits acts as an incentive for clients to go onto disability and then to stay there, which leads to more claims of longer durations than have been seen before,” he said.

Liberty had experienced higher group income protection claims and higher critical illness claims in its retail business in 2016, said Henk Meintjies, head of risk product management.

Liberty paid overall claims to the value of R4.3bn in 2016 — a R700m increase on 2015.

“As your book matures and policyholders’ sums insured grow, it is generally accepted that you will pay more in claims,” said Jenny Ingram, head of risk product development at Momentum.

Premium rates typically were guaranteed for 10 years once the policy was taken out, Meintjies said.

Discovery said it did not expect to do any rate adjustments to policies.

“On the new business side, our most recent pricing adjustment was done to bring us in line with the market,” said Gareth Friedlander, head of research and development at Discovery Life. Discovery’s Vitality and Vitality-drive programmes, which encouraged a healthy lifestyle and better driving behaviour, had led to significantly lower claims than expected, Friedlander said.

In 2015, Discovery Life’s toptier Vitality members claimed 56% less than non-Vitality members, he said. There was a 90% lower claims incidence among these members, who have Gold and Diamond Vitality status, for lifestyle-related diseases such as cardiovascular and smoking-related illnesses.

These members also had 70% lower life claims due to motor vehicle accidents than non-Vitality members, Friedlander said.