Group risk industry ‘at a tipping point’

THE 2019 Sanlam Benchmark Survey has found that, for many employers, fees for group life and disability cover have risen by more than 50% over the past few years, because insurers are facing higher costs.

Various factors – from marketwide pricing practices to worsening national health and taxation changes – have led to the higher burden in insurers, which may ultimately result in certain group risk products, such as disability cover, becoming unaffordable. Sanlam believes the industry is at a tipping point and is calling for urgent collaboration and action from all stakeholders.

Group risk products cover retirement fund members for life, disability and dread disease.

Michele Jennings, the chief executive of Sanlam Group Risk, says Sanlam asked employee benefits consultants to identify dominant trends in the group risk industry.

They noted increases in funeral cover, increases in rates, and the introduction of severe illness benefits. Over half of those surveyed had seen large rate increases in the past three years, and one out of five saw more claims being repudiated.

Jennings says: “We’ve seen steep rate increases – sometimes up to

50% – and a firming up of rates across providers. The increases were partly a correction after competition drove prices for this commodity down in the past, but there were many other contributing factors.”

A key contributor, she says, is how risky South Africa is as a nation. “We have the unenviable title of being the world’s ‘unhealthiest country’ (Indigo Wellness Index) and the sixth ‘drunkest country’ (WHO) on earth. We also have the most drunkdriving deaths in the world. A risky population is expensive to insure.

“In Australia and the US, the high cost of disability products led to some of them being withdrawn from the market. These countries are considerably less risky than South Africa, so the fact that things became too expensive for these nations makes the issues back home even more worrying,” Jennings says.

She says the local group risk market may be at a tipping point.

“We are urging stakeholders to work together to find a way to sustain the financial inclusion that group disability products provide. We need to provide meaningful cover at sustainable rates.”