Life insurer Bidvest Life saw the highest number of claims in its 27-year history in 2021, with claim volumes increasing by 44% compared to 2020. This spike was largely driven by an increase in Covid-19 infections and complications, says the company’s acting Chief Product and Pricing Actuary, Nic Smit.
Presenting Bidvest Life’s 2021 Claims Report today, Smit said that 92% of all claims paid in 2021 were for income protection benefits. Life cover was responsible for 4% of claims, and critical illness for 2%. Nearly two thirds (63%) of claims were made by people under the age of 45, and fractionally more males (54%) than females (46%) claimed for income protection. The youngest policyholder to claim on an income protection benefit was 18 (a high school student who sustained a rugby injury). This was his second claim.
“While we’re a fully-fledged life insurer, the big takeout of our Claims Report is that everyone should protect their income, starting at a young age. The fact is that in 2021 our policyholders were much more likely to claim on income protection than any other type of life insurance, whatever the cause. The occupations that claimed on income protection benefits last year reflected a mix of self-employed people, commission earners, contracted and salaried individuals, with business owners (29%) and fitness professionals (26%) being the top claiming occupations” said Smit.
Minor infections were the leading cause of income protection claims, accounting for 58% of all claims paid in 2021. Most of these were due to Covid-19, with Covid-related claims increasing from 24% of claims in 2020 to 46% in 2021. Mental health issues, largely due to anxiety, burnout and depression, were the fourth-most common reason for claiming on Income Protection.
“Our 2021 Claims Report showcases the power of income protection as part of our drive to educate South African customers, many of whom are largely unaware such a product even exists. Advisers were the second highest claiming occupation for income protection in 2021, and the fact that two-thirds of our top 100 supporting Independent Financial Advisers have their own Bidvest Life policies illustrates that we are the product of choice for many advisers,” said Smit.
Bidvest Life paid 92% of all income protection claims made in 2021. The leading cause of non-payment was that clients tried to claim under their income protection policies while still within their waiting period. In income protection terms, the waiting period is the number of days a policyholder must be sick or unable to work before a claim will start paying.
According to the Claims Report, 56% of claims lasted less than 30 days, but 60% of income protection policies sold had a waiting period of 30 days or longer. “The latest data has simply underlined the need for consumer education around concepts such as waiting periods to ensure that clients understand and select products that suit their needs, and the critical role of financial advisers in helping consumers understand the terms of their policies,” said Smit.
“The waiting period you choose can make or break a claim. If a self-employed person is unable to work for 24 days, but their waiting period is 30 days, they’ll be left without an income for that period and probably be saddled with significant medical bills into the bargain,” said Smit.
During 2021, less than 2% of income protection claims lasted longer than 24 months. Of these, Bidvest Life’s experience has shown that you could expect 4 out of 10 of these long-term claims to not be permanent and would therefore not result in a payment on lump sum disability cover. This shows that there are a number of injuries and illnesses that impact your ability to work that won’t result in a claim on lump sum disability cover.
Despite this, most policies sold in the industry in 2021 didn’t include income protection. Life cover benefits dominate sales in the life insurance market, representing 78% of new sales. The remaining 22% was divided among disability cover (7%), critical illness cover (8%) and income protection (7%). In stark contrast to the industry trend, nearly half of Bidvest Life’s policies sold (47%) were for income protection, followed by life cover (33%).
“For us, financial planning should start by asking: ‘How will I provide for myself and my dependants if I get ill or injured and I can’t work?’,” said Smit. “At Bidvest Life, we’ve always believed that Income Protection cover should be the foundation of your financial plan. Your monthly income pays for your short-term insurance, medical aid, lump sum cover, your savings and retirement plan. Even a short-term interruption in your income due to injury or illness places your entire financial plan at risk.”