SA life insurers see shock increase in death claims
New numbers from the Association for Savings and Investment South Africa (ASISA) show that the life industry recorded 434,216 death claims in 2020 - almost 40% more than the 317,442 claims received in 2019.
More than half of the death claims were for funeral policies (266,321) while the rest were for life policies, credit life policies and other policies that provide life cover.
The Covid-19 pandemic killed almost 130,000 South Africans, if so-called excess deaths are included, and over recent days some of South Africa’s big insurers have reported large increases in their death claims.
Old Mutual reported on Monday that in the first two months of 2021 alone, it recorded some R1.9 billion in Covid-related mortality claims.
After putting aside almost R1.4 billion for expected Covid mortality claims last year, Old Mutual has hiked this provision by R4 billion after higher-than-expected claims.
The company is also concerned about “emerging expectations of a third wave given evidence of virus mutation, the slow pace of the vaccination rollout and upcoming public holidays and the winter season”.
Momentum Metropolitan saw a 35% increase in death claims at its Momentum Corporate unit, which underwrites employee benefits - including death and disability insurance - for many SA companies. The number of death claims in the age group between 40 and 70 was almost 50% higher than usual. The unit suffered a headline loss of R212 million in the past six months, from a profit of more than R300 million in the same period in the previous year.
In Momentum's retail life businesses, average death claims were 20% higher than in comparable periods.
Liberty suffered a headline loss of almost R1.6 billion for the past year after an 11% increase in its total death and disability claims paid during 2020, which amounted to R11.7 billion.
In all, SA life insurers paid out R522.7 billion to policyholders and beneficiaries last year - in retirement annuity and endowment policy benefits as well as claims against life, disability, critical illness and income protection policies. This was almost R32 billion more than in 2019.
Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee, points out that these payments eclipsed government’s R335.2 billion social development budget for 2021.
“For most of the recipients the payments would have been triggered either by a tragic life event like death or disability, or retirement. This means that more than half a trillion rand was paid to consumers last year to provide financial stability in a time of great need as contractually agreed when the policy was first taken out,” De Villiers said.
Despite the larger claims, De Villiers says the South African life insurance industry still had more than double the legally required capital buffer in place.
The life insurance industry held assets of R3.23 trillion at the end of 2020, while liabilities amounted to R2.89 trillion. This left the industry with free assets of R333.5 billion, which is more than double the capital required by the Solvency Capital Requirements (SCR).
Almost 9 million new individual recurring premium risk policies (life, disability, dread disease and income protection cover) were bought last year, compared to 9.6 million in 2019. Some 10.2 million risk policies were also lapsed last year – from 8.8 million in 2019.
Receive a daily news update on your cellphone. Or get the best of our site emailed to you
Go to the Business Insider front page for more stories.