Incidence of non-disclosure on life policies on the decline

LIFE assurers paid 99.3% of all claims against fully underwritten life policies last year, resulting in benefit payments of R14.4 billion to beneficiaries following the death of a loved one.

The 2017 annual death claim benefit statistics for fully underwritten policies released this week by the Association for Savings and Investment South Africa (Asisa) reveal life assurers paid 34 100 death benefit claims, while 238 claims, to a value of R318.8 million, were declined.

Fully underwritten life policies are those that require the policyholder to complete a full underwriting process, which involves a comprehensive assessment of the policyholder’s health and medical history.

Policies that do not require the full underwriting process were not included in the statistics.

Hennie de Villiers, the deputy chairman of the Asisa Life and

Risk Board Committee, says Asisa has been consolidating death benefit claims statistics for fully underwritten life policies since 2012 in order to provide consumers with the peace of mind that the majority of claims are paid.

“Since life companies exist primarily to provide consumers with the option of insuring themselves and their loved ones against the financial impact of an event like death, disability or disease, policyholders and their beneficiaries should be able to trust that their policies will pay when a life-changing event occurs.”

De Villiers says the value of benefit payments over the six years 2012 to 2017 has more than doubled (from R6.8m to R14.45m), despite a small drop in the number of claims submitted (34 724 in 2012 and 34 100 in 2017).

De Villiers said the primary reason supplied by life assurers for rejecting claims was non-disclosure, which involved an act of dishonesty on the part of policyholders.

NON-DISCLOSURE

Non-disclosure refers to the failure of policyholders to disclose material information about a medical or lifestyle condition in an attempt to secure lower premiums or to obtain cover without exclusions.

Non-disclosure accounted for 50.4% of death benefit claims declined last year (55.3% in 2016).

De Villiers says it was encouraging that there had been a consistent decline in incidents of non-disclosure since 2012, when they accounted for 70.34% of claims rejected.

“Unfortunately, however, too many policyholders continue to take the risk of withholding information when applying for life cover at the expense of their beneficiaries.”

De Villiers says that attempting to hide any medical conditions when applying for your life cover would place the value of your policy and the continued financial wellbeing of your family after your death at far greater risk than any potential exclusions you may face.

UNDERWRITING EXCLUSIONS

De Villiers noted that 12.6% of claims declined last year were as a result of the policyholder dying from a condition that had been specifically excluded by their policy (9.2% in 2016).

“This translates to less than 0.1% of all claims submitted, signalling that the overwhelming majority of policyholders died as a result of factors unrelated to an excluded health condition on their life policy last year.

“This highlights the importance of being upfront with your life assurer rather than jeopardising your policy payout.”

A life company can apply an underwriting exclusion when, for example, the policyholder suffers from a specific illness such as diabetes, but is healthy otherwise. The assurer may then exclude this condition from the cover.

This means that if the policyholder is killed in an accident or dies of a cause unrelated to diabetes, for example, the life policy will pay. However, if the death is related to the excluded condition, the death benefit will not pay.

SUICIDE

Incidents of claims declined due to suicide increased to 65 claims (27.3%) last year from 62 claims (23.7%) in 2016.

Life insurers generally apply a two-year exclusion period to suicide in order to prevent someone from taking out life cover with the intention of committing suicide shortly afterwards. This means that if a policyholder commits suicide within the first two years of taking out life cover, no death benefit will be payable.

FRAUD

Claims declined due to criminal intent by either the policyholder or the beneficiary increased slightly to 7.6% of claims in 2017 (7.3% of claims in 2016).

Claims fraud usually involves the submission of fraudulent documentation and/or syndicate activity aimed at getting the life company to pay a claim to someone not entitled to the benefit.