When Durban widow Denise Ganas was denied a payout and asked to repay a R50 000 cash benefit in 2017 after her husband was shot in a hijacking attempt, most of South Africa was up in arms - perhaps with the exception of a few hardened industry experts who had seen this type of thing before, says Baker.
Many people took to Twitter asking whether life insurers can ethically refuse to help a client in dire need, whether or not the client is legally entitled, he says.
The questions that circulated on social media included: “Is this life insurance thing just a scam?” “With so many Ts&Cs, how do you know if you’re really covered, until it’s too late?” “Do morality and ethics now trump the law, and how is it possible that these do not always align?”
Baker says these questions go back longer than the Ganas case. For many years, insurance has been viewed as a grudge purchase and is frequently near the bottom of the consumer trust index - 2019 again saw financial services as the “least trusted sector” globally for the respected Edelman Trust Barometer.
But the truth is that many more claims are being paid out than most people are aware of, and a staggering number of legitimate claims are waiting to be paid out but haven’t been because of the policyholders, Baker says. “People either don’t know this or simply don’t care. It’s hard to believe, considering that so many people’s livelihoods and even lives are involved.”
According to the 2018 figures from the Association for Savings and Investment South Africa, life insurers paid back more than R67 billion in claims during 2018 (the 2019 figures are not yet available) which amounts to 99.3 percent of all claims received, Baker says.
“However, a staggering R17bn in approved claims is waiting to be paid out by the industry and haven’t been due to policyholders, not insurers.”
Baker says that life insurers have a real and pressing motive for paying out as many legitimate claims as possible. Not only do insurers have to keep these funds available, but they also incur the cost of trying to trace beneficiaries and managing the assets.
“What Ganas proved was that there is a need to re-assess the way that people interact with insurers, and vice versa. There is mounting evidence that the Ganas case did create greater awareness, with many people coming forward to check their cover based on their previous disclosures.
“It also highlighted the power of public opinion and that the traditional claim methodologies require some re-thinking,” says Baker.
Everyone wins if the public knows more about their insurance. But the problem is that, because of the massive fallout from these events, the fear of getting embroiled in yet another social media storm leads the insurance industry not to talk about it enough, rather than to talk about it more with the aim of educating everyone, he says.
While the facts of the Ganas case in its entirety are probably known only to a limited number of people, the initial reason for the Ganas repudiation was the non-disclosure of a medical condition(s). “This was, to the public, immediately odd - someone had died at the hands of a hijacker, and what on earth did that have to do with their medical condition?”
Baker says insurance is all about risk and protecting against the risk of uncertain events (so even though death is ultimately certain - the timing and method thereof should not be known in order for it to be insurable), and non-disclosure is taken very seriously.
“How would people have felt if the person had died directly as a result of the condition that was not disclosed or a related health or medical condition, or even an accident that was not a result of violent crime?”
This shows that disclosing every potential health risk is vital.
So while the industry (and there are specialists that are looking at this case to see how similar cases will be addressed in future), says Baker, the regulators and the public wrestle with these uncomfortable situations, the advice is to disclose everything that you know when dealing with your insurer.