Old Mutual’s 2022 Claim Statistics Report reveals a significant decrease in payouts for underwritten claims, particularly life insurance. This, along with the claims experience over the past two years, provides financial advisers with insights that will enable them to ensure their clients have the right cover, says Kwena Mothibi, the head of customer solutions at Old Mutual Personal Finance.
Data-based understanding will allow advisers to offer risk cover that best fits their customers’ needs to ensure they have sufficient cover in the case of unforeseen circumstances, Mothibi said.
In its latest Claims Statistics Report, Old Mutual said it paid R14.7 billion in claims across the group’s South African operations in 2022. Old Mutual reported a payout ratio of 96% in underwritten claims and an average payout of R29.2 million every working day.
The payouts include underwritten (mostly retail life, disability, and illness claims), non-underwritten (mostly retail funeral claims), and corporate claims and represent a year-on-year decrease of 30.7%, primarily due to a decline in Covid-19-related claims.
“The decline in overall payouts of around R6.5bn was expected, as 2021 was an exceptional year for claims due to the surge caused by Covid-19, and we are now starting to see a return to normal,” said John Kotze, Old Mutual’s head of retail protection product marketing. However, claims paid were still higher than in pre-Covid 2019.
Non-underwritten claims amounted to R2.7bn, corporate claims were R4.6bn, and underwritten claims were R7.3bn – the latter compared to R11bn the previous year.
Death cover claims constituted R5.8bn, followed by severe illness cover claims at R946m, disability lump-sum claims at R413m, and disability income at R60m. Retrenchment cover claims were R5.2m, signalling the pandemic’s lingering economic effects.
The decline in payouts, largely anticipated after the surge of claims in 2021 due to Covid-19, should not lull consumers into complacency but serve as a potent reminder of life’s inherent risks, Mothibi said.
The report contains vital information that financial advisers can reference to guide consumers in making informed decisions about risk cover.
The significant amount paid out in death and severe illness claims underscores the importance of having adequate life and illness insurance cover. The prominence of cancer and cardiovascular disorders underscores the necessity of comprehensive illness insurance that includes these critical illnesses, he said.
Claim trends among men and women
The report also highlighted the different claim trends between the sexes. For instance, trauma claims made a significant contribution to male claims and central nervous system disorders made the top three for female claims.
“It is important to have cover that considers your individual needs and is specifically tailored for you,” Mothibi said.
Statistically, men made up a higher proportion of claims, as has been the case over the years, with the overall claims split being 56% male and 44% female.
Men had the youngest (22 years old) and oldest (96 years old) claimants and an average claim age of 59. The youngest female claimant was 23, the oldest 95, and women had an average claim age of 58.
The top three claim categories for men were cancer, cardiovascular disorders, and trauma, while for women, the top claim categories were cardiovascular disorders, cancer, and central nervous system disorders. The decline in the prominence of respiratory diseases for both sexes was further evidence of the recovery from Covid-19.
Rheumatoid arthritis appeared in the top five claims under the illness benefit among women for the first time in five years. This is due to an improvement in claim definitions and Old Mutual making them more lenient.
Common diseases
The average claim age and the common diseases among different age groups can guide financial advisers to advise consumers on purchasing timely and suitable cover, Mothibi said.
For instance, the report revealed that 70% of severe illness claims were for events that fall under what is known as the Big Four: of cancer, coronary artery bypass graft (CABG), heart attack, and stroke. This illustrates the significant risk these illnesses pose and that consumers should consider policies that cover these illnesses extensively.
Cancer made up most of these claims at 63%, followed by heart attack claims (19%), stroke claims (10%), and CABG claims (8%).
CABG claim numbers increased from 2021, which was primarily attributable to men. Female claims for heart attacks also increased from 2021.
Breast cancer was one of the leading causes of all female cancer claims, with 90% falling under the illness claims category. It was also revealed that women start claiming for breast cancer at relatively younger ages, with higher claiming rates between the ages of 40 and 50 at 27%, 50 and 60 at 32%, and 60 and 70 (29%).
Prostate cancer was one of the significant contributors to male cancer claims, with most of the claims by men above the age of 50. As in the past, heart attacks and prostate cancer continue to be of concern in men.
Retrenchment claims
Although most retrenchment claims were made those aged 30 to 40 and 50 to 60, the report noted that the ages of retrenchment claimants covered a large range, including 20- to 30-year-olds, highlighting that one is never too young to consider retrenchment cover as part of their financial safety net.
Why most claims were rejected
The reasons for claim rejection can guide advisers on what to prioritise and emphasise in their customers’ policy contracts when applying for cover, Mothibi said.
Most of the 4% of claims that were not paid was because customers did not meet the criteria for their claim, which Old Mutual refers to as “benefit definition not met”.
Fraud was another reason for the repudiation of claims, followed by general exclusion, non-disclosure, suicide exclusion, and underwriting exclusion.
The increase in repudiation because of “benefit definition not met” could the result of harsher economic conditions leading to customers trying to claim even when they do not have a valid claim, or customers do not fully understand the events for which they are covered. This was often true for disability claims when the state or condition of the claimant was not permanent, or the claimant could still work.
