R230bn paid out for life insurance during Covid-19 crisis

Life policyholders received R230 billion in claims and benefit payments during the initial period of the Covid-19 crisis, according to the Association for Savings and Investment South Africa (Asisa).

This figure came from its half-year to end-June long-term insurance statistics, gathered from Asisa members in line with regulatory reporting requirements introduced by the Insurance Act of 2018.

The R230 billion in claims and benefit payments is about R18 billion less than the corresponding figure for the prior six-month period.

The statistics also show that in spite of over 480,000 policyholders getting R1 billion in premium relief as a result of the crisis, the life industry remains financially healthy and well capitalised, says Hennie de Villiers, deputy chair of Asisa’s life and risk board committee.

Relief payment holiday Policyholders who had been struggling financially received relief payment holidays on policies of three to six months if they were suddenly unable to pay their monthly premiums due to Covid-19 – if they were in good standing.

De Villiers said the majority of policyholders who were granted relief resumed their payments at the end of the relief period to ensure that their policies remained in force. Though the relief is good
news for policyholders, the crisis has taken a toll on the life insurance industry’s prospects.

This can be seen in 4.6 million new individual recurring-premium risk policies being signed up during the period, but more than 5.4 million lapsing. A lapse occurs when the policyholder stops paying premiums for a risk policy that has no fund value.

Such instances saw the number of risk policies in force drop from 34.6 million at the end of December 2019 to 33.8 million at the end of June 2020.

The pressure on South Africans can also be seen in 282,467 new policies being sold during the period, while 364,887 were surrendered.

A surrender is when the policyholder stops paying premiums and withdraws the fund value before maturity.

De Villiers says that while this is concerning it was not surprising, given the impact of the Covid-19 lockdown on the earning ability of thousands of South Africans.

This article first appeared on Moneyweb and was republished with permission.

For more news your way, download The Citizen’s app for iOS and Android.