Policyholders paid R230bn in claims and benefits during lockdown

Over 480 000 also got R1bn in premium relief as a result of the crisis.
With free assets of R300bn, the insurance industry is 'well positioned' and will be able to honour all valid claims. Image: Shutterstock

Life policyholders received R230 billion in claims and benefit payments during the initial period of the Covid-19 crisis, according to the Association for Savings and Investment South Africa (Asisa).

This figure came from its half-year to end-June long-term insurance statistics, gathered from Asisa members in line with regulatory reporting requirements introduced by the Insurance Act of 2018.

The R230 billion in claims and benefit payments is about R18 billion less than the corresponding figure for the prior six-month period.

The statistics also show that in spite of over 480 000 policyholders getting R1 billion in premium relief as a result of the crisis, the life industry remains financially healthy and well capitalised, says Hennie de Villiers, deputy chair of Asisa’s life and risk board committee.

Policyholders who had been struggling financially received relief payment holidays on policies of three to six months if they were suddenly unable to pay their monthly premiums due to Covid-19 – if they were in good standing.

De Villiers said from what he has seen, the majority of policyholders who were granted relief resumed their payments at the end of the relief period to ensure that their policies remained in force.

Crisis puts the industry under pressure

Though the relief is good news for policyholders, the crisis has taken a toll on the life insurance industry’s prospects.

This can be seen in 4.6 million new individual recurring-premium risk policies being signed up during the period, but more than 5.4 million lapsing. 

Read:

A lapse occurs when the policyholder stops paying premiums for a risk policy that has no fund value. Such instances saw the number of risk policies in force drop from 34.6 million at the end of December 2019 to 33.8 million at the end of June 2020. 

The pressure on South Africans can also be seen in 282 467 new policies being sold during the period, while 364 887 were surrendered.

Read: Regulator reprimands life companies still taking blood tests

A surrender is when the policyholder stops paying premiums and withdraws the fund value before maturity.

De Villiers says that while this is concerning it was not surprising, given the impact of the Covid-19 lockdown on the earning ability of thousands of South Africans. 

“When times are tough consumers are less likely to take out new savings policies. At the same time, more policyholders surrender their savings policies to access their savings due to financial hardship.” 

The lockdown restrictions also capped life insurers’ ability to advise clients and to sign up new business.

Sector still strong

Even so, looked at as a whole, De Villiers says the industry is relatively healthy as it held assets of R3.1 trillion at the end of June 2020, while liabilities amounted to R2.8 trillion. 

This left it with free assets of R330 billion, which is more than double the reserve buffer required by the new Solvency Capital Requirements. The free assets of R330 billion are, however, about R44 billion less than the figure for the corresponding prior six-month period.

Nevertheless, De Villiers says having free assets of R300 billion implies that the insurance industry is well-positioned to deal with economic pressures exacerbated by the Covid-19 pandemic. 

“This means that we can give policyholders and their beneficiaries the assurance that the industry is well-positioned to weather this storm and that we will be able to honour every single valid claim,” says De Villiers.

Listen to Nompu Siziba’s interview with Marius Botha from Stangen Life (or read the transcript here):

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Interesting if there are roughly 34 million policy holders in South Africa out of approximately 60 million people. Then 1 in 2 people have a policy or some people have more than one policy.

Are we over or under insured? I do know that the first thing to look at is the policy finer details to save costs. Do you really need x million life insurance if you have x minus quite a bit in debt?

Not an industry I have any time for.

The privileged Saffa’s are over insured without doubt. This is to be expected as no reliance can be placed on cANCer govt.

Here in the townships we are all under insured as we have zero assets of consequence, no income, no job security etc. In the movies (Wall Street: Money Never Sleeps) we are called NINJA’s.
– No Income
– No Job
– No Assets.

To answer your q’s re over/under insurance. Perhaps it’s time to examine your insurances. Here in the township, we found the following
insurances are no longer needed:
– mortgage insurance,
– car insurance,
– car maintenance plan,
– child education plan,
– roadside assistance,
– home contents insurance,
– mobile phone insurance,
– funeral insurance.
I suppose we are over insured.

I have a simple solution. Cancel majority of the excess junk. Pay the money to your mortgage (bond). Ensure you have access facility on mortgage.This will allow you instant access to money in emergencies.

P.S I had education fund for my child. When the time came to exercise this, I tried (as it was going to save me -lots – money) to fund his education via scholarships and has been successful in securing average of 80% (i.e +-$150k). I saved a few cents.

I hope this response will confuse you even more!!

I can guarantee you most of those are funeral policies. While I agree with your comment about life insurance, it also gets taken out for estate planning, buy-and-sell agreements etc, and things like income protection, which also accounted for a lot of the claims during lockdown, especially from medical professionals. So, it is not as simple as you make it out to be

Thank you for an interesting article Larry. I actually never considered this sector when studying COVID-19 relief packages. I looked at the following areas:
– Mortgage repayment holidays, whereby banks waive mortgage payments (but capitalise interest). ‘Good Hearted’ banksters. Increasing the capital amount of debt and also extending term of mortgage by average 3 months. Add compounding interest and we have grown the bank’s debt book incrementally.
– Same for car loans, personal loans, credit cards etc. Care should be taken that the banksters might offer to consolidate these debts in your mortgage (bond) and turn an unsecured debt into a secured debt. Debtor will enjoy “interest and cashflow benefits”.
– Rental relief to tenants from landlords.

What are the benefits to Life Assurers?

‘Not an industry I have any time for.’ – tough words.

The Financial Services Sector must be the most regulated of all services sectors in South Africa.

Few ‘commentators’ and critisizers will take the time to study the Ombud’s numbers and statistics to see where the most complaints (% -wise) arise. – It’s at the lower end of the premium scale.

Yes, there will always be examples of unscrupulous ‘Advisors’ but they are being caught out more often lately.

Insurance is still sold and not bought. It’s not in people’s nature to comprehend death- and that’s why the ‘selling’ of life Insurance remains one of the most noble professions.

Life Assurance is an act of love whilst some view it as a grudge payment. It can never ‘replace’ a loved one but it stands between financial disaster and order when claims are paid.

End of comments.

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