The 2018 annual death claim benefit statistics for fully underwritten individual life policies released this week by the Association for Savings and Investment South Africa (Asisa) show that life insurers paid 33545 claims, representing 99.3 percent of all claims received. Life insurers declined 222 claims, a mere 0.7 percent of claims against underwritten individual life policies in 2018.
Fully underwritten life policies are issued only if the policyholder has completed a full underwriting process, which involves a comprehensive assessment of the life insured’s health and medical history.
Rosemary Lightbody, a senior policy adviser at Asisa, said the value of death claim benefits for fully underwritten individual life policies has more than doubled from R6.8bn to R15.1bn since Asisa started consolidating statistics in 2012.
Death claims against fully underwritten life policies will always be paid by insurers, provided the claim is not fraudulent and the policyholder did not:
* Commit suicide within the first two years of taking out the policy.
* Withhold important information from the insurer when applying for the policy.
* Die as a result of an exclusion.
Lightbody said more than half of claims were rejected by life insurers due to non-disclosure of material information, which involves an act of dishonesty on the part of policyholders.
Non-disclosure refers to policyholders not disclosing material information to a life insurer about a medical or lifestyle condition to secure lower premiums or to obtain cover without exclusions.
Lightbody said it was encouraging that the percentage of claims declined due to non-disclosure has decreased significantly from 70.3 percent in 2012 to 55.4 percent in 2018.
She said it is critically important for consumers to understand the potentially devastating financial consequences for their families of not honestly disclosing important information such as any lifestyle- or health-related detail that could materially affect the terms of the policy.
Lightbody said if you are not sure whether information could be considered as material by the life insurer, rather disclose it.
Lightbody said the exclusions applied by life companies are usually for risky part-time activities or territorial exclusions where people spend some time working in other countries under dangerous conditions.
This means that if the policyholder is killed as a result of the excluded activity or in the excluded territory, the life policy will not pay a benefit.
Life insurers generally apply a two-year exclusion period to suicide, in order to prevent someone from taking out life cover with the intention of committing suicide shortly afterwards. This means that if a policyholder commits suicide within the first two years of taking out life cover, no death benefit will be payable to the beneficiaries.
Claims declined due to criminal intent by either the policyholder or the beneficiary increased to 16.2 percent of claims last year from 7.6 percent in 2017.