Higher excess death rate among fully underwritten policyholders

Death claims for fully underwritten new-generation life insurance policies were nearly four times higher than the expected death rate during the peak of the third wave of Covid-19, according to the Actuarial Society of South Africa (ASSA).

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 this year.

Although not all the claims were for policyholders who died as a result of Covid-19, five of South Africa’s largest life companies reported a fourfold increase in death claims at the peak of the third wave against a book of 2.09 million fully underwritten new-generation life policies.

These statistics are contained in the Death Claims Dashboard maintained by ASSA’s Continuous Statistical Investigation (CSI) Committee.

Anja Kuys, the chairperson of the CSI Committee, said 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 about 85% of South African individual life insurance premiums.

The 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 said 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.

The pandemic has resulted in massive upward swings in the number of claims, Kuys said.

“While the usual number of claims expected for fully underwritten new-generation 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

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), Kuys said.

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 said more significant divergences are seen for insured lives.

Source: ASSA Death Claims Dashboard

Kuys said there are two main reasons for the higher excess death rate among policyholders with fully underwritten life policies:

• 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.”
• The death rate for the insured population was lower than for the total South African population before the arrival of the Covid-19 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 said the biggest divergence in the number of claims received to the number expected was recorded during the second and third waves.

During the third wave, life insurers recorded the highest number of claims in 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 about four-and-a-half times, while the excess death rate for the overall population was about 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 vs confirmed Covid-19 death claims

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, Kuys said.

However, the actual number of Covid-19 deaths is much higher.

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, Kuys said.

Higher-than-expected natural deaths

According to Kuys, the dashboard indicates that among policyholders the rate of claims due to natural causes has remained consistently above normal since the beginning of the pandemic. Natural deaths exclude deaths caused by accidents, violent crimes and suicide.

The graph below shows that the pattern of claims received due to deaths from natural causes closely follows the patterns of the Covid-19 infection waves.

Source: ASSA Death Claims Dashboard

Death claims per age band

The impact of Covid-19 has been surprisingly similar across all age groups in that the number of claims has almost doubled for young lives, as well as for the older ages, Kuys said.

The vaccination roll-out for adults aged 60 and over started in mid-May 2021, and Kuys said that while it is perhaps too early to comment, it is promising to see that the relative increase in death claims for those age brackets are slightly lower.

She said this will continue to be monitored throughout the fourth wave and will be reported on when as soon as credible statistics are available.

The number of death claims has nearly doubled for men and women.