Covid-19 impact revealed in life companies’ claims figures
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Life insurance claims statistics for 2020 released this week by Liberty and Old Mutual reveal how Covid-19 has disrupted normal business between life insurers and consumers, directly and indirectly. Old Mutual paid out 22% more on claims for its underwritten risk products (way above its average 9% year-on-year increase), with a rise in claims related to respiratory illness and a rise in retrenchment claims. And although the increase in payouts on Liberty’s risk products (of 7.94%) was broadly in line with its average annual increase, the company saw a significant rise in its mortality and retrenchment figures.
Death and illness
Cancer remains firmly at the top of the list of reasons for claiming: 23% of Old Mutual’s death claims were cancer-related, as were 27% of Liberty’s death and disability claims. For Old Mutual there was a sharp rise in death claims related to respiratory illness (under which category a claim due to Covid-19 would fall), from 8% of claims in 2019 to 14% last year. Liberty says that during the first wave of the pandemic, between June and September last year, it had a spike in death claims of three times normal levels. The effects of the second wave, which began in December, will only be reflected in this year’s statistics.
The effects of the pandemic were equally apparent in the Old Mutual’s disability cover category, where sickness income cover claims increased 3.5 times year-on-year. The highest cause of claims was under “infectious diseases”, which includes Covid-19.
“This is the first time that ‘infectious diseases’ has shown up in the report in double digits (10%) in this category. What is also worth noting is the 25% rise in the pay-out amount for disability income claims this year,” says John Kotze, retail protection product head at Old Mutual.
As might have been expected, claims relating to accidental death were down from 22% of claims to 19% of claims for Old Mutual, with motor accidents accounting for 53% of claims (down from 61% in 2019).
Contrary to what may have been expected, however, considering the psychological impact on people of the pandemic, lockdowns and job losses, Liberty saw a decrease in both suicide-related and mental-illness-related claims in 2020 compared with 2019. Suicide claims on life cover were down from 4.1% to 2.6% of claims, while income protection claims related to mental and behavioural disorders decreased from 6.6% to 5.1% of claims.
However, at a media briefing on the Liberty statistics, psychiatrist Dr Ingrid Williamson said that the long-term effects of Covid-19 are being recognised as a growing problem. Many people hospitalised for the disease are not able to return to their former level of functioning and require ongoing care. Research showed that 34% showed neurological or psychiatric symptoms within six months of their infection.
“Due to the debilitating nature of this disease, post-Covid-19 psychiatric disorders, such as depression, anxiety, post-traumatic stress disorder, dementia and psychosis, have been a real phenomenon, and this has an impact on the wellbeing of a lot of people,” Williamson said.
Liberty’s retrenchment claims peaked between August and October last year. During these three months, claims were over 60 a month, compared with just over 10 a month before the onset of the pandemic.
“This trend was expected given the harsh realities and subsequent impact on jobs because of the pandemic. The most impacted regions were, not surprisingly, the main economic hubs of Gauteng, the Western Cape and KwaZulu-Natal," said Kresantha Pillay, head of Liberty's Lifestyle Protector range of products.
Big changes were also noted in Old Mutual’s retrenchment cover category, which revealed a R3 million increase in retrenchment claims (a 30% increase on 2019). Within this category, just over a third of claimants were between the ages of 30 and 40, and 76% were male.
OMBUD COMPLAINT STATISTICS
According to the 2020 annual report of the Insurance Ombudsman, also released this week, the office of the ombud dealing with long-term insurance received 14 198 written requests for assistance in 2020 (compared with 11 915 in 2019), which included 6 756 valid complaints. This is the highest number of written requests the office has ever received.
A total of 6 512 complaints were finalised. This includes 3 624 full cases in which the ombudsman intervened, and of these 31.73% were resolved wholly or partially in favour of complainants. Declined claims remained the biggest cause of complaints, with a slightly higher percentage (50%) of the total complaints than in 2019 (47%).
The ombud’s office says it received 456 complaints that were directly related to Covid-19 or to the lockdown. Most of these complaints were about claims for retrenchment or inability to earn an income. One issue that arose was whether an insurer is obliged to pay a claim for benefits related to an inability to earn an income when a policyholder receives Temporary Employee/Employer Relief Scheme (TERS) payments. The office has now determined on this aspect that TERS cannot be regarded as income earned and, therefore, cannot be the reason for a claim to be declined.
The ombud, Judge Ron McLaren, said he was concerned that some insurers were still not applying the Treating Customers Fairly policy correctly in dealing with policyholders, “which is unfortunate, particularly when the policyholder is already in distress”.