The Association for Savings and Investment SA (Asisa) is hoping that its disclosure of life insurers’ claims payment trends will get more people to take up life policies when they see that their beneficiaries will be paid.
Yesterday, Asisa published its second annual consolidated death benefit claims statistics, which showed that life insurers paid 98.9 percent of all claims made against fully underwritten life policies last year. The paid-out claims amounted to R8.4 billion.
In 2012, life insurance firms paid 99 percent of claims to a value of R6.8bn.
“I do believe this is one of the most important stats we release. If people trust and believe they will be paid, they are more likely to change their decisions regarding buying insurance products,” Asisa deputy chief executive Peter Dempsey said.
In October last year, Asisa released statistics that showed South Africa had a death and disability insurance shortfall of R24 trillion last year, making individuals under-insured for death and disability by as much as 60 percent.
The death benefit claims statistics for last year were submitted by the 14 long-term insurers. Dempsey said claims payments by different insurers were weighted to avoid distortion when people compared a large insurer with a small one. But all companies’ claims paying ability was at the top end of the international average, ranging between 98 percent and 99.1 percent.
Dempsey said that the international average for death and disability claims payments was 95 percent.
But while South African life insurers’ payment of these claims surpassed the international average, 394 claims to the value of R178.8 million were still denied.
Fraud, non-disclosure, suicide and underwriting exclusions were the reason for these rejections. Fraud made up 4.6 percent of these rejected claims. Although this was a relatively small percentage, Dempsey said in the current tougher economic environment, Asisa was seeing more desperate people resorting to insurance fraud. And the biggest challenge to the industry was syndicates, which were getting more sophisticated in their scams.
“You always have to play catch-up with the syndicates. They will always be involved. And the downside is that you can’t investigate every single death or disability claim.
“The international statistics suggest that if you pick up 100 fraudulent claims, there are another 20 that are not detected,” he said.
While the industry grapples with fraud, putting millions of rands aside every year to upgrade its detection mechanisms, the second most concerning issue is non-disclosure which made up 61.9 percent of rejected claims last year. But at least there was a drop on these claims in 2012.
Dempsey said Asisa had “much evidence” that people who failed to disclose pre-existing conditions did so deliberately rather than because they were not educated about how it would affect their insurance policies.
“One example we have is of a person who resigned from the police force in South Africa to escort troops in Iraq. He never mentioned how dangerous his job was now. People do that because they know that they might lose the cover or it might become more expensive,” he said.