The insurance industry is grappling with unpredictable changes in conditions affecting death and disability, further complicating pricing for risk and expected claims.
Reporting on its death and disability claims paid between 1 July 2022 and 30 June 2023, Discovery Employee Benefits has confirmed the challenges in predicting claims during this period.
Discovery Employee Benefits insures more than 500 000 individuals at about 2 500 employer groups countrywide. This week, Discovery announced it paid R1.94 billion in death and disability claims through its group risk benefits over this period.
Guy Chennells, the general manager and head of product at Discovery Employee Benefits, says the claims trends for the 12-month period differ by cause of claim and by the age, gender, or income groups within each cause of claim, making the ultimate trend trajectory hard to predict.
“We anticipated that many of these claim trend drivers would be with us post-Covid when we were still in the pandemic. Now the challenge is to try and get the expected levels of claims right so that pricing remains sustainable going forward,” Chennells says.
Understanding claim drivers is critical to Discovery’s claims insights processes because it helps to target and address poor health causes and outcomes among the people it insures, he says.
Up and down
The group risk claims data for 2023 shows that total deaths (from natural and unnatural causes) have increased slightly compared to pre-pandemic levels.
Although natural deaths have decreased slightly, Chennells is concerned that this decline could be short-lived. He says the causes of death driving the decline may merely be the effects of temporary “mortality acceleration”. However, other causes of death are increasing because of the long-term effects of Covid and individuals not conducting preventative screenings and annual health checks.
“Mortality acceleration” describes when the number of deaths accelerates “ahead of schedule” and ahead of a normal expect death rate. In other words, some members whose health was already compromised (and would have been more likely to die in the following year or two because of their existing frailties or co-morbidities) died from Covid.
“There are so many things happening. Certain conditions that were causing an increase in natural deaths are down over the past 12 months, while others are increasing. It’s interesting to show what’s happening, but it’s hard to predict what will happen in the coming years, given all these effects,” says Chennells.
The claims data shows that the increase in total deaths compared to pre-pandemic levels is driven by a rise in unnatural deaths.
The insights emerging in 2023 also show there has been an increase in disability claims, with significant differences in the trends of diseases driving disability claims compared to pre-pandemic levels three years ago.
Natural deaths
Overall, natural deaths declined during 2023. The top four leading causes of claims for deaths by natural causes were respiratory diseases (24%), cardiovascular complications (23%), cancer (19%), and multi-organ failure (14%).
Although cardiovascular complications are one of the top causes of natural death claims over the past year, Discovery’s data reveals a 16% decline in cardiovascular-related deaths compared to the 2020 financial year.
There has also been a 40% decline in renal disease-related claims during the same period (both cardiovascular and renal-related conditions were associated with highly elevated risk of death after a Covid infection). Discovery says that these declines are, however, expected to be short term.
Discovery finds that cancer-related deaths – also one of the leading causes of natural deaths in 2023 – have increased, in particular for members over the age of 50, while there has also been a rapid increase in deaths related to diabetes and multiple organ failure.
“With different causes of natural death moving in different directions, and for different reasons, it is especially hard this year to predict what next year might hold,” Chennells says.
He states that, on one hand, there is no reason to believe that the underlying behaviours or disease prevalence for these conditions has changed for better or for worse. He also notes a decline in the number of mortalities from cardiovascular and renal disease over the past year. Chennells suggests that if this is related to mortality acceleration, it should be expected that those causes would return to normal levels in the near term.
“On the other hand, we note that cancer, multi-organ failure, and endocrine-related deaths continue to remain at levels that are way above pre-Covid levels. These may be true trends related to increasing underlying condition prevalence trends.”
The data for each condition is as follows:
- Endocrine and metabolic diseases-related deaths for the 2023 financial year are 116% higher compared to pre-Covid levels.
- Multi-organ failure deaths are 20% above pre-Covid levels.
- Cancer-related death claims remain at 36% above the claims recorded in the pre-Covid years. Members above the age of 50 still experienced excess deaths from cancer, and their claims stayed 44% higher than the deaths recorded in 2020.
- Deaths caused by respiratory diseases were also 47% above the levels recorded pre-pandemic for those aged 50 years or older.
Unnatural deaths
Unnatural deaths are 20% above the levels recorded for unnatural deaths during the 2020 financial year. Chennells say this has been a persistent trend since the start of Covid-19.
Suicide-related deaths have increased by 54% compared to pre-Covid levels, with the biggest increases among members who are under the age of 40.
“We have noted that suicide statistics in the under-30s age group have skyrocketed, but there was also a significant increase in the 30- to 40-year-old age group. It could be because people in the middle-age bands are the ones facing the most economic pressure, with the rising interest rates and inflation putting pressure on their bond repayments, other debt, and family financial commitments,” adds Chennells.
Unnatural deaths caused by crime increased sharply during Covid, with a seeming correlation to rising unemployment. But Discovery notes that although still higher than before Covid, crime-related death rates are 30% down from the Covid period peak because employment rates have improved slightly from the record-high unemployment rates recorded in 2021.
Disability claims
Claims data from Discovery Employee Benefits shows that elevated disability levels have persisted since 2020. Of the R1.94 billion the company paid out in total claims, 38% were for disability claims, with 74% of those coming from the Income Continuation Benefit (ICB). ICB claims are now 10% higher than pre-pandemic levels.
Chennells says disability rates increased more drastically this year, with conditions such as cancer, nervous system, respiratory, and mental and behavioural disorders remaining above pre-pandemic levels.
He attributes the nervous system and respiratory trend in large part to the long-term after-effects of Covid-19 because the virus damages lungs and other respiratory organs and increases the risk of developing blood clotting disorders that can lead to cardiovascular or nervous system-related conditions.
“When it comes to mental and behavioural disorders, we’ve seen a 79% increase in disability claims from young families (30 to 40 age band) since the year to June 2020,” he adds. “Middle-income earners have also seen a dramatic rise, likely linked to difficult economic conditions that Covid and the time post-Covid have caused.”
Women seem to be taking the most strain, with their disability claims increasing by 13% relative to pre-Covid levels, while disability claims from men have decreased by 10% compared to pre-Covid levels, and male disability claims were down 28% from 2022, says Chennells.
