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Bidvest Life paid out the highest number of claims in 27 years in 2021, with an increase of 44% compared to 2020, primarily driven by more infections and complications. A total of 92% of all claims were for income protection benefits, 4% for life cover and 2% for critical illness.
Nearly two thirds (63%) of claims were from people under the age of 45 and fractionally more males (54%) than females (46%) claimed for income protection. The youngest policyholder to claim on an income protection benefit was an eighteen-year-old high school student who sustained a rugby injury. This was his second claim, says Nic Smit, acting chief product and pricing actuary at Bidvest Life.
“While we are a fully-fledged life insurer, the big takeout of our claims report is that everyone should protect their income, starting at a young age. In 2021 our policyholders were much more likely to claim for income protection than any other type of life insurance, whatever the cause.”
He says the occupations most claimed for last year were self-employed people, commission earners, contracted and salaried individuals, with business owners (29%) and fitness professionals (26%) at the top of the list for claiming occupations.
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Minor infections were the leading cause of income protection claims, accounting for 58% of all claims paid in 2021. Most 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, Smit says.
“Our 2021 claims report shows the power of income protection as part of our drive to educate South African customers, many of whom are largely unaware such a product even exists.”
Advisers were the second highest claiming occupation for income protection in 2021 and Smit says the fact that two-thirds of Bidvest’s top 100 supporting independent financial advisers have their own Bidvest Life policies illustrates that it is the product of choice for many of them.
Bidvest Life paid 92% of all income protection claims made in 2021. The primary cause for non-payment was that clients tried to claim under their income protection policies during their waiting period which is the number of days a policyholder must be sick or unable to work before a claim will start paying.
The claims report shows that 56% of claims lasted for 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.”
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He says this shows that the waiting period you choose can make or break a claim.
“If a self-employed person is unable to work for 24 days, but the waiting period is 30 days, he will be left without an income for that period and probably be saddled with significant medical bills as well,” Smit says.
During 2021, less than 2% of income protection claims lasted longer than 24 months and Smit says Bidvest Life’s experience has shown that you could expect that 4 out of 10 of these long-term claims will not be permanent and would therefore not result in a payment of a lump sum for disability cover.
“This shows that there are a number of injuries and illnesses that impact your ability to work that won’t result in a claim on lump sum disability cover. Despite this, most policies sold in the industry in 2021 did not include income protection.”
According to Smit, life cover benefits dominate sales in the life insurance market, representing 78% of new sales. The remaining 22% was divided among disability cover (7%), critical illness cover (8%) and income protection (7%).
“In stark contrast to the industry trend, nearly half of Bidvest Life’s policies sold (47%) were for income protection, followed by life cover (33%).”
He advises that financial planning should start by asking: ‘How will I provide for myself and my dependants if I get ill or injured and I am unable to work?’.
“Income protection cover should be the foundation of your financial plan. Your monthly income pays for your short-term insurance, medical aid, lump sum cover, your savings and retirement plan. Even a short-term interruption in your income due to injury or illness places your entire financial plan at risk.”
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