South Africa’s largest life insurers received 22 544 death claims against fully underwritten life policies in the 19 months between the start of the Covid-19 pandemic in March last year and the end of September 2021. While not all the claims were for policyholders who died as a result of Covid-19, five of South Africa’s largest life insurance companies reported a fourfold increase in death claims at the peak of the third wave against a book of 2.09 million policies.
Fully underwritten policies are those issued to policyholders who have participated in a comprehensive medical and lifestyle assessment to gauge risk, and exclude older policies like universal life policies, limited underwriting policies like credit life policies and funeral policies.
These statistics are contained in the updated Death Claims Dashboard maintained by the Continuous Statistical Investigation Committee of the Actuarial Society of South Africa (Assa). Anja Kuys, chair of the committee, says the dashboard has been updated to reflect data for the three Covid-19 waves recorded to the end of September 2021. Claims statistics are submitted by five of the country’s biggest life insurers, representing around 85% of South African individual life insurance premiums.
The Assa Death Claims Dashboard was designed to track excess death claims against fully underwritten new generation individual life policies. Excess death claims represent those that exceed the expected numbers based on historical data. Kuys says the aim is to provide life insurers with consolidated insights into the impact of the Covid-19 pandemic to guide accurate pricing of future policy benefits as well as ensuring sufficient capital reserves.
Death claims against fully underwritten new-generation individual life policies:
2020
March: 636
April: 540
May: 629
June: 852
July: 1 256
August: 1 105
September: 786
October: 710
November: 703
December: 1 546
2021
January: 2 709
February: 1 131
March: 860
April: 833
May: 985
June: 1 800
July: 2 691
August: 1 772
September: 1 000
Total: 22 544
According to Kuys the pandemic has resulted in massive upward swings in the number of claims. “While the usual number of claims expected for these life policies would be between 600 and 700 a month, over the 19 months to September 2021 the number of claims has consistently been above average, and at the peak of the second and third waves reached around 2 700.”
Excess deaths
Kuys says claims for insured lives lost exceeded the expected death rate by a large margin during all three Covid-19 waves (represented by the red line in the graph below). While statistics from the South African Medical Research Council (SAMRC) show that the actual death rate for the overall South African population (grey line in the graph) also exceeded the expected rate, Kuys notes that more significant divergences are seen for insured lives.
Kuys notes that there are two main reasons for the higher excess death rate in policyholders with fully underwritten life policies. She explains that the average age of the insured population is higher than the average age of the overall South African population. “The numbers provided by the SAMRC include children, a group that fortunately did not experience excess deaths during the pandemic,” says Kuys.
The second reason, according to Kuys, is that the death rate for the insured population was lower than for the total South African population before the arrival of the pandemic. This resulted in life insurers recording a much higher percentage increase in excess deaths for policyholders.
“There are significant differences in insured mortality as compared to overall population mortality, which has always been present in South Africa, even pre-Covid. Therefore, it is very important for life insurers to have access to credible statistics relating to the population they insure, to ensure sufficient capital reserves and pricing.”
Kuys adds that the biggest divergence in the number of claims received to expected was recorded during the second and third waves. During the third wave, life insurers recorded the highest number of claims during July 2021, with an excess number of claims almost four times higher than the expected. The excess death rate for the overall population was only two times higher than expected.
At the peak of the second wave, life insurers received death claims during January 2021 that exceeded the expected death rate by around four-and-a-half times, while the excess death rate for the overall population was around two-and-a-half times higher than expected.
At the peak of the first wave during July 2020, the excess number of claims experienced by life insurers of 192.4% was the closest to the overall population excess rate of 158%.
Total death claims versus confirmed Covid-19 death claims
Kuys says that of the 22 544 death claims received between March 2020 and the end of September 2021, only 4 163 were due to confirmed Covid-19 deaths. She notes, however, that the actual number of Covid-19-related deaths is much higher. She explains that death certificates do not specify Covid-19 as the cause of death and only state whether the cause of death was due to natural or unnatural causes, while data from insurers sometimes classify Covid-19 deaths as pneumonia, organ failure or natural causes. – supplied by Assa.
PERSONAL FINANCE