Covid dominates claims

BIG CHUNK: 87% OF ONE COMPANY’S INCOME PROTECTION SETTLEMENTS

Highest number of claims in firm’s 26-year history of operating.

Income protection claims spiked due to Covid last year, with claim volumes at one insurer increasing by 17% compared with 2019 and making up 87% of claims paid during the pandemic year.

Minor infection claims due to Covid accounted for almost a third of the company’s income protection payouts.

According to life insurer FMI, a division of Bidvest Life Ltd, this was the highest number of claims in its 26-year history due to a sharp increase in temporary income protection claims related to Covid.

Minor infections made up 31.2% of all income protection claims paid, with most of these for Covid infections and complications. Covid was the leading minor infection.

Mental health claims, mainly due to anxiety, burnout and depression, accounted for 3.5% of all claims, the second-most common reason for claiming for income protection, Leza Wells, chief product actuary at FMI said.

Cancer was the third-most common claim, followed by rotator cuff repair, hysterectomy, tendonitis, synovitis and bursitis, carpal tunnel release, abscess drainage, lumbar spine fusion and gallbladder removal.

Apart from these claims, 7% were for additional benefits, such as retrenchment cover, while 3% were for critical illness and life cover claims and fewer than 1% for lump sum disability claims.

“Covid had a major impact on the life insurance industry, with significant increases in claims for income protection, retrenchment, death and funerals.

“While we saw a higher than usual number of income protection claims, our exposure to the virus was limited because we have a newer book with younger ages that have been underwritten more recently.”

She said the pandemic continues to show that income protection was still the most effective insurance against the risk of injury or illness.

“The payouts allowed policyholders to continue providing for their dependants and employees

during a highly unusual year with many financial challenges.”

FMI paid 92% of all claims last year. Clients who tried to claim for income protection during the mandatory waiting period was the leading cause for the 8% of unpaid claims. The waiting period is the number of days a policyholder must be sick or unable to work before the income protection insurance starts paying. According to the claims report: 40% of claims lasted less than 30 days, with an average duration of 18 days for Covid claims;

Claimants with a seven-day waiting period accounted for 86% of Covid claims;

64% of income protection policies sold had a waiting period of 30 days or longer;

The top five occupations for comprehensive cover were business owners, financial advisors, doctors, hairdressers and beauticians; and

The top five occupations on event-based cover were homemakers, students, fitness professionals, sport coaches and animal-related occupations.