Life policy prices on hold despite Covid toll

● SA’s insurance companies have seen a surge in life insurance claims related to Covid-19 — but they aren’t yet looking at raising prices for policies.

Jenny Ingram, head of product development and pricing for life insurance at Momentum, said this week the group’s claims payouts to date are at a record high of R4.6bn, 30% up from the previous year.

This includes life insurance claims for Covid-19 deaths as well as an increase in deaths due to heart attacks and strokes. Ingram attributes the latter to the economic and psychological stress of lockdown.

She said there had been a notable 65% increase in life insurance claims for deaths due to suicide, particularly of men. Suicide is not covered in the first two years of a policy.

Ingram also noted a rise in chronic fatigue and mental incapacitation claims among women in terms of disability insurance.

The sharp rise in life insurance claims ties inwith “excess death” data. According to the South African Medical Research Council, excess deaths from natural causes from May 6 to October 13 this year numbered 46,759.

Liberty has paid out R5.9bn in claims this year — a 25% increase from 2018 — with 470 claims to the value of R2bn a direct result of policyholders contracting Covid-19.

Johan Minnie, managing executive for client & adviser experience at Liberty, said these include death and funeral claims.

The balance was largely for cancer claims, followed by stress-related diseases such as strokes and heart attacks.

Absa has also seen a spike in life insurance claims. Overall, death claims have increased 15% — most of which are not Covid19-specific, but rather stress-related. The company said its loss-of-income claims have also spiked, without providing details.

Eugene Strauss, managing executive for Absa Life Insurance, said there is a correlation between policyholders’ financial stress and the increased death rate.

Lee Bromfield, CEO of FNB Life, said the biggest impact on their claims this year was the rise in retrenchments or inability to earn an income.

Comparing April-September 2019 with the same period in 2020, unemployment claims rose by more than 230%, and death claims rose by about 25%, he said.

High-income earners are also facing financial pressure.

Investec Life CEO Michael Goemans said there has been a spike in income protection claims, specifically from medical specialists.

The Association for Savings and Investment SA (Asisa) said claims figures across the industry show payouts this year were at a record high.

Insurance companies in SA collectively have R330bn in reserves, which is double what is required by law. This is testament to how resilient the industry is, said Hennie de Villiers, deputy chair of the Asisa life & risk board committee.

With record high payouts, concern has been raised about a potential increase in premiums. Sasfin Securities portfolio manager Nesan Nair said that though it’s hard to say if insurance companies will increase premiums, the effects of the pandemic were not priced into current premiums. and the expected long-term rise in mortality rates due to stress-related diseases means there will be an impact on premiums in the future.

Nair said the psychological toll of the pandemic may also increase morbidity or the rate of disease in SA.

Goemans said Investec currently has no plans to change pricing.

Ingram said Momentum will not change its pricing any time soon as any increase could only be calculated based on a few years of evidence of the pandemic’s effect.

Likewise, Strauss said Absa is not considering a price increase. He said it may be something the business would consider, but at the moment it’s “our time to stand up”.

De Villiers said given the competitiveness of the life insurance industry, a substantial price increase in premiums was unlikely.

Old Mutual did not respond to requests for comment, and Clientele Life declined to comment.