Life insurance data highlights the need for guidance
By THAKANE SETSABI-MUSHONGA General Manager: Customer Solutions Old Mutual Mass and Foundation Cluster.
South African life insurers paid out R578 billion in total in claims and benefits to policyholders and beneficiaries in 2022. This was confirmed in a recent report by the Association of Savings and Investments South Africa (ASISA). The payments included claims in respect of life, disability, critical illness and income protection policies, as well as retirement annuity and endowment policy benefits.
The sad reality
Although we acknowledge that it is less than the record-breaking R608 billion in insurance payouts made in 2021, when COVID-19 related death claims were at their peak, we recognize that these claims will bring much relief and support to thousands of South African families amidst a tough economic environment.
Conversely, the number of policyholders who lost access to financial protection – due to the current tough times – grew significantly. The ASISA statistics show 8.4 million recurring premium policies lapsed last year – a million more than in 2021. In addition, almost 1.2 million fewer recurring premium policies were sold in 2022 than the previous year. The ASISA statistics also show 689 888 recurring and single premium savings policies were surrendered in 2022.
Hennie de Villiers, Deputy Chair of the ASISA Life and Risk Board Committee, calls insurance cover, and especially life cover, “your most valuable financial asset”. He believes South Africans who let go of it when they are struggling to make ends meet are making “an irreversible mistake”.
Focus on customers, always
With many changes impacting the life insurance landscape – from regulatory changes to digital transformation and smarter data analysis – it can be a challenge for financial advisers, tied agents and independent brokers to know where to channel their focus and energy. More than ever, today’s customers, made vulnerable by tough economic conditions, need to be the industry’s number one focus.
It is true that with a few clicks, customers can access the latest insurance insights and trends, compare products and shop around for the most convenient cover. But an adviser or broker can still add real value and superior experience by providing steady financial guidance. One of the best things advisers and brokers can do for their customers is to build a solid relationship of trust so that they are the first port of call for solutions when clients experience financial challenges. Insurers should encourage customers to contact their advisers pre-emptively, long before lapsing and surrendering policies becomes the only option.
Reduce the risks
Old Mutual, which paid out R14.7 billion in claims in 2022 across the group’s operations in South Africa, reports that across claims categories (death, illness, disability) a common reason for claiming was the diagnosis of the non-infectious, Non-Communicable Diseases (NCDs) such as heart disease and strokes, cancers, chronic lung diseases and diabetes.
The diagnostic claims pattern is similar to that of previous years (with the exception of COVID-19 claims), indicating that the risk of these illnesses and conditions is entrenched and in need of intervention. Although genetics play a role, the risk of NCDs, according to the World Health Organisation (WHO), is increased by preventable, modifiable behavioural patterns such as tobacco use, physical inactivity, unhealthy diet and the harmful use of alcohol.
Providing life insurance that protects families against the financial implications of specific risks is as necessary and valuable as ever. Life insurers and their agents now also have an increasing ability (thanks to big data tools and technologies) to help prevent and reduce the costly risks they cover. According to a McKinsey report on life insurance, insurers will play an increasingly prominent role in the health and well-being of their customers to increase policyholder longevity.
