Bidvest Life recorded the highest number of claims in its 27-year history last year, with claim volumes increasing by 44% compared to 2020.
The spike was largely driven by an increase in Covid-19 infections and complications, said the company’s acting chief product and pricing actuary, Nic Smit. However, growth in the company’s book was also resulting in more claims.
Presenting Bidvest Life’s 2021 claims report last week, Smit said 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%.
Contrary to trends in the life insurance market, whose new business is dominated by life cover (78%), with income protection comprising only 7%, most of Bidvest Life’s new business comes from income protection (47%), followed by life cover (33%), according to a survey by Swiss Re. Life cover comprised only 4% of Bidvest’s claims.
Nearly two-thirds (63%) of claims were made by people under the age of 45, and 17% of claims were made by policyholders in their first year of cover.
The youngest policyholder to claim on an income protection benefit was an 18-year-old high school student who sustained torn ligaments while playing rugby. This was his second claim.
The life insurer’s youngest beneficiary claimant was a five-year-old girl, who claimed for a lump-sum critical illness benefit after undergoing surgery for a congenital heart defect. This was the second claim in her name.
“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,” 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.
More than 40% of policyholders who claimed for income protection last year had claimed before. Smit said that, in Bidvest’s experience, a policyholder who submitted a claim was four times more likely to claim again.
Bidvest said the possible reasons for this were that policyholders find that claiming is easier than they thought and claimants were a greater risk of having a related condition.
By occupation, business owners (29%) were the highest-claiming policyholders for comprehensive cover in 2021. They were followed by financial advisers (20%), administrators (11%) and hairdressers (7%).
Event-based cover claims were highest among fitness professionals (26%), followed by sports coaches (20%), professional athletes (13%) and homemakers (10%).
Claims under Bidvest’s event-based cover product increased from 5% in 2020 to 8% last year.
Waiting periods tripping up policyholders
Bidvest Life paid 92% of all income protection claims lodged in 2021. The leading cause of non-payment was that clients tried to claim while still within their waiting period.
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 four out of 10 of these long-term claims could be expected not to be permanent and would therefore not result in a payment on lump-sum disability cover. This shows there are a number of injuries and illnesses that impact policyholders’ ability to work that won’t result in a claim on lump-sum disability cover.
