The 2022 Old Mutual Claims Statistics Report revealed a significant decrease in payouts for underwritten claims, especially life insurance, mainly due to the submergence of Covid-19. This, along with the claims experience over the last two years should serve as a learning curve for financial advisers to ensure their customers have the right cover.
Kwena Mothibi, Head of Customer Solutions at Old Mutual Personal Finance, says data-based understanding will allow advisers to offer risk cover that best fits their customer needs to ensure they have sufficient cover in the case of unforeseen circumstances.
“When advising customers, it’s about looking at whether they’re in control of their expenses, if those they love are secure and whether they have the freedom to pursue their dreams and evaluating this as part of holistic planning to ensure financial wellness,” says Mothibi.
“Therefore, using these statistics to understand the insurance landscape better and tailor your advice to your customers accordingly will be of immense benefit to customers. Being informed and up-to-date means you can provide your customers with the best possible guidance, helping them choose the right risk cover to protect their standard of living.”
In its latest Claims Statistics Report, Old Mutual has revealed that it paid R14.7 billion in claims across the group’s SA operations in 2022. Old Mutual also reports a payout ratio of 96% in underwritten claims and an average payout of R29,2 million every working day.
The report also revealed that R7,3 billion was paid out for underwritten claims. Notably, death cover claims constituted R5,8 billion, followed by severe illness cover claims at R946 million, disability lump sum claims at R413 million, and disability income at R60 million. Retrenchment cover claims stood at R5.2 million, signalling the pandemic’s lingering economic effects.
Mothibi says financial advisers should heed that the 2022 Claims Statistics Report clearly shows the essential areas where they must advise their customers on the need for robust risk cover – death, disability, severe illness, and retrenchment.
“This reported a decline in payouts, largely anticipated after the surge of claims in 2021 due to Covid-19. This should not lull consumers into complacency but rather serve as a potent reminder of life’s inherent risks,” says Mothibi.
The Claims Statistics Report uncovers vital information that financial advisers can reference to guide South African consumers in making informed decisions about risk cover. The significant amount paid out in death and severe illness claims underscores the importance of having adequate life and illness insurance cover.
“The latest Claims Statistics Report serves as a vital resource for financial advisers, outlining key trends in risk cover claims. financial advisers can ensure that consumers are adequately informed about the key risks by understanding these trends. They may select the most suitable insurance products to safeguard their future, thereby securing their standard of living against unforeseen circumstances,” Mothibi underlines.
For instance, the prominence of cancer and cardiovascular disorders in claims for males and females underscores the necessity of comprehensive illness insurance that includes these critical illnesses.
The report highlighted the different claim trends between the sexes. For instance, whilst cancer and cardiovascular disorders were the top claim categories for both males and females, trauma claims made a significant contribution to male claims and central nervous system disorders made the top three for female claims. “It is important to have cover that considers your individual needs and is specifically tailored for you”, explains Mothibi.
The average claim age and the common diseases amongst different age groups can guide financial advisers to advise consumers on purchasing timely and suitable coverage.
For instance, the report revealed that 70% of severe illness claims were for events that fall under what is known as the BIG 4, which consists of cancer, coronary artery bypass graft, heart attack, and stroke. This illustrates the significant risk these illnesses pose and that consumers should consider policies that cover these illnesses extensively.
Other trends
Whilst majority of the retrenchment claims were made by 30 to 40 and 50 to 60 year olds, the report noted that the ages of retrenchment claimants covered a large range, including 20 to 30 year olds, highlighting that one is never too young to consider retrenchment cover as part of their financial safety net.
The reasons for claim rejection can guide advisers on what to prioritise and emphasise in their customers’ policy contracts when applying for cover. Of the 4% repudiated claims, most were due to “benefit definition not met”. A reason for this increase could be that harsher economic conditions have led to customers trying to claim, even when they do not have a valid claim or customers do not fully understand the events that they are covered for. This was often true for disability claims when the state or condition of the claimant was not permanent, or the claimant could still work.
Advisers must ensure that their customers fully understand what they are covered for, avoid fraudulent activity, disclose all relevant information, and understand the exclusions that apply to their policies.
“From the report, it is clear that the health landscape is evolving, with different diseases becoming more prominent and clear differentiators in sex and age, for example. Advisers must consider this when evaluating options for their customers and recommending insurance policies to ensure their coverage remains relevant and comprehensive,” Mothibi concludes.