Why you need life insurance regardless of your life stage

Diseases of lifestyle are becoming more worrying and costly

Latest insurance stats are showing that it’s never too early to sign up for risk cover such as life insurance and severe illness and funeral cover.

Picture: 123RF/ANDRIY POPOV
Picture: 123RF/ANDRIY POPOV

It’s never too early to sign up for risk cover such as life insurance and severe illness and funeral cover. This has never been clearer than when looking at the 2019 claims statistics released recently by long-term life insurers Sanlam, Old Mutual, Momentum Life and Discovery Life. 

Sanlam revealed that the most income protection claims for 2019 (38%) were paid to people aged 36 to 45, followed by 19% paid to those aged 26 to 35. In the same period, the most sickness claims were paid to people aged 26 to 45 years. 

“Year on year, we see an increase in claims related to diseases of lifestyle [diabetes, high blood, cholesterol, etc.] and this confirms the public health warning that diseases of lifestyle are becoming more worrying and costly,” notes Dr Marion Morkel, chief medical officer at Sanlam. 

Kresantha Pillay, Liberty’s lead specialist for Lifestyle Protector, says 26% of the group’s total income protection claims were paid out to people in the age band 31 to 40. A further 7% was paid out to those aged 20 to 30.

Momentum’s youngest income protection claimants were a 23-year-old man who qualified for 12 months of payouts while recovering from a car accident and a 24-year-old woman who received compensation while recovering from a surgery. 

Momentum’s statistics also show that it’s paying claims for those who have enjoyed long lives. 

“2019 was the ninth consecutive year during which we made claim payouts for centenarians, with a total of eight death claims paid for clients over the age of 100. The oldest client for whom a death claim was paid out was a male client aged 104,” says George Kolbe, head of marketing for Momentum Retail Life Insurance.

Increase in claims stemming from psychiatric conditions

Momentum Life’s 2019 statistics show that the most income protection claims occurred for women aged 40 to 49, and the main cause was related to mental illnesses such as major depression and anxiety. 

This tied in with Old Mutual’s 2019 statistics which highlighted psychiatric conditions as the biggest cause for disability claims. 

Of the total disability claims paid out, 11% were related to psychiatric disorders representing a 59% increase since 2016. 

Alarming increase in suicide claims 

Momentum Life’s top causes for death claims were cancer, cardiovascular diseases and unnatural deaths at 32%, 30% and 17% respectively. 

Kolbe says there was an alarming increase of 65% in the number of suicide claims, with men accounting for 88% of these claims. 

Cassey Chambers, operations director at the South African Depression and Anxiety Group (Sadag) , notes that the suicide rate is an alarming indication of how many people are completely overwhelmed by their problems and feel that suicide is the only option. 

Typically suicide is excluded on most life insurance policies, which means that the policy will not pay out if you commit suicide. However, this exclusion is usually contingent on a waiting period of two years. Once the two-year period has expired, the exclusion no longer applies. The exclusion clause and waiting period will vary between insurers. 

The Covid-19 effect 

“The increase in claims for psychiatric disorders was already emerging pre-Covid-19, and so it is very likely that mental health conditions may increase even more due to the widely reported Covid-19-related stresses,” says John Kotze, head of protection products at Old Mutual. 

Kolbe concurs, saying that Covid-19 virus is likely to create an increase in claims over the next year. 

Kolbe says the Momentum anticipates the following knock-on effects post-Covid-19:

  • An increase in death claims over the next few months; 
  • More claims on income protection benefits, particularly those with shorter waiting periods; and 
  • More retrenchment-related claims. 

“Although the impact of Covid-19 on critical illness claims is still uncertain, we have identified a number of events where we expect future claims to arise,” he adds. 

Sanlam product actuary Petrie Marx says the insurer paid out eight death claims during the Spanish flu of 1918, which was also the company’s first year in business. 

“While we do not specifically cover virus infections other than HIV, Covid-19 will remain covered if it causes death or any other claiming benefit under a life policy. 

“If Covid-19 should cause you to be unable to do your work, or cause you, in terms of severe illness cover, some long-term lung damage, organ damage or cardiovascular problems, you will be covered regardless of whether it’s Covid-19-related or something else,” he says. 

Discovery Life has already paid out 51 lump sum life insurance claims for Covid-19 related deaths and illnesses, including one for R12.5 million. 

Of the life cover claims, 53% were paid to clients who were at least 60 years old and 65% were paid to medical professionals. 

Billions paid out collectively in 2019

Sanlam alone paid out R4.3bn in claims in 2019, broken down further into R3.3bn for life cover; R397m for income cover, and R406.5m for injury and trauma-related claims. 

Kolbe says although Momentum Life paid out more than R19bn in claims over the past five years, the payouts in 2019 have been the highest to date with the single largest claims for disability being R16m, for death R27m, income disability R167,299 a month and critical illness R8m. 

The total paid out by Momentum Life in 2019 for individual insurance claims was R4.6bn while Discovery Life paid out R4.8bn in claims for the same period. Liberty paid out a whopping R5.9bn in claims in 2019, which translates to R4.2bn for life cover; R800m for income protection and R900m for dread disease cover. 

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