FNB says it has paid out R150 million in life insurance nobody asked for

Business Insider SA
 A fresh grave
  • First National Bank says its life insurance arm has paid out R150 million in "proactive" claims – before anyone asked for the money.
  • It monitors data from the department of home affairs to check for deaths.
  • It has also paid out more than R100 million related to Covid-19.
  • FNB is punting those numbers as the insurance industry, broadly, take a reputation hit for fighting off coronavirus business-interruption claims. 
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Over the past two years FNB Life has paid out R150 million in "proactive claims", parent company First National Bank said on Tuesday, money paid without anyone having to ask for it.

FNB claims it is the only life insurer to monitor data from the department of home affairs, so that it can detect deaths "enabling customers to automatically receive their much-needed insurance pay-outs".

Meanwhile, the company said, FNB Life has also paid out "in excess of R100 million" on credit life policies for claims related to the coronavirus pandemic, for people who were retrenched, or saw their income affected in other ways. Such policies typically guarantee debt – held by a bank such as FNB – in the event of a loss of income. While they pay the bank, they are pitched as freeing policyholders from the worry of servicing debt when disaster strikes.

Insurance may be a grudge purchase, FNB said in a statement, but "the challenges that people have experienced with Covid-19 arguably highlights the value of this instrument in financial planning".

FNB released the number as the broader insurance industry suffers under a reputation blow due to the approach some insurance companies have taken to business interruption cover.

Several insurance companies have fought, hard, against paying out policyholders with specific extensions supposed to cover a loss of revenue due to a viral outbreak. Their arguments have included that, while they provided insurance against damage caused by a virus, their policyholders had actually suffered losses because of lockdowns.

See also | 11 months since the first case, Santam will assess Covid-19 insurance claims

Regulators say insurance companies are sufficiently liquid to pay out such business interruption claims without any systemic risk, and have encouraged – though not forced – financial institutions to honour them.

South African courts too have gently encouraged insurance companies to consider their ethical obligations to keep customer businesses alive through interim payments.

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