Medical underwriting ‘can boost your annuity’
FINANCIAL worries should be the last thing on the mind of a retiree diagnosed with breast cancer, says Bjorn Ladewig, longevity actuary for retirement income specialist Just.
Ladewig said it is therefore beneficial that retirees buying an annuity income at retirement are medically underwritten at the beginning of the process to see whether they qualify for a higher income.
He said the latest in-house research by the retirement income specialist firm showed that of Just’s medically underwritten cases, 30 percent qualified for an uplift of at least 5 percent.
Ladewig said that unlike living annuities, which pay out a portion of a retiree’s savings each year and offer no income guarantees, an enhanced life annuity guarantees an income for life.
He said the predetermined monthly amount can never decrease, as it will either remain the same or increase year-on-year, depending on the type of life annuity purchased.
An enhanced annuity can pay a higher starting income based on certain health, socio-economic and lifestyle factors, including a chronic illness such as breast cancer.
He said the firm had focused on breast cancer, as this month was breast cancer awareness month, but the concept also applied to other forms of cancer and life-threatening medical conditions. Ladewig said that what Just does differently is that for people with reduced life expectancy, the firm can offer them a higher income.
Referring to a breast cancer case study, he said a woman who qualified for a monthly “uplift” in income of 14 percent as a result of being medically underwritten, received a diagnosis of advanced breast cancer in 2017 and although it is under control, she remains at high risk of it spreading to other parts of her body because of its advanced status.
He said that at retirement the woman approached Just with a purchase sum of about R880 000 and requested a quote for a lifetime income.
She also requested a 10-year minimum payment period, which would mean that in the case of an unexpected early death, income would continue to be paid to her nominated beneficiaries, in either a lump sum form or as ongoing, monthly payments for 10 years.
To calculate her starting income, an underwriter conducted a short telephone call to obtain her medical declaration, without requiring a physical medical examination.
He said many factors contribute to the high uplift reflected in her quote, which include the combination of her advanced diagnosis, smoking and socio-economic factors.
Ladewig said the financial implications of surviving breast cancer are often underestimated.
He said that apart from the financial pressures because of the current economic climate, cancer survivors’ financial stress could be exacerbated by not having enough capital to cover living expenses, let alone the unforeseen medical bills throughout their recovery years.
“Financial worries should be the last thing on the mind of a retiree diagnosed with breast cancer.
"It’s already difficult to live within your means at retirement and even more so if you have medical expenses. It is therefore beneficial that retirees purchasing an annuity income at retirement are medically underwritten at the beginning of the process to see if they qualify for a higher monthly income,” said Ladewig.
According to 2014 data relating to breast cancer, the National Cancer Registry recorded more than 8 200 cases.
According to Discovery, breast cancer is the most treated cancer for female Discovery members, average South Africans and women globally.
Breast cancer cases increased significantly among Discovery members, with incidents increasing from the age of 40.
In 2017, there were more than 1 000 breast cancer cases for Discovery members alone.
The average price of cancer treatment increased by 17 percent from 2011 to 2017. In 2017, the average price of caner treatment was more than R77 000, depending on the complexity of the case.