The company’s acting chief product and pricing actuary, Nic Smit, said the spike was largely driven by an increase in Covid-19 infections and complications.
Presenting Bidvest Life’s 2021 Claims Report to its supporting advisers on Friday, Smit said 92 percent of all claims paid in 2021 were for income-protection benefits. Life cover was responsible for 4 percent of claims, and critical illness for 2 percent.
Nearly two thirds (63 percent) of claims were made by people under the age of 45, and fractionally more males (54 percent) than females (46 percent) claimed for income protection.
The youngest policyholder to claim an income protection benefit was 18 (a high school learner who sustained a rugby injury). This was his second claim.
Smit said that while they were a fully fledged life insurer, the big take-out of the claims report was that everyone should protect their income, starting at a young age.
“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. The occupations that claimed on income protection benefits last year reflected a mix of self-employed people, commission earners, contracted and salaried individuals, with business owners (29 percent) and fitness professionals (26 percent) being the top claiming occupations” Smit said.
Minor infections were the leading cause of income protection claims, accounting for 58 percent of all claims paid in 2021.
Most of those were due to Covid-related claims, increasing from 24 percent of claims in 2020 to 46 percent in 2021.
Mental health issues, largely due to anxiety, burnout and depression, were the fourth-most common reason for claiming on Income Protection.
He said the company’s 2021 Claims Report showcased the power of income protection as part of its drive to educate its customers, many of whom were largely unaware that such a product existed.
“Advisers were the second-highest claiming occupation for income protection in 2021, and the fact that two-thirds of our top 100 supporting Independent financial advisers have their own Bidvest Life policies illustrates that we are the product of choice for many advisers,” Smit said.
Bidvest Life said it paid 92 percent of all income protection claims made in 2021. It said the leading cause of non-payment was that clients tried to claim under their income protection policies while within their waiting period. In income protection terms, the waiting period was the number of days a policyholder must be sick or unable to work before a claim would start paying.
According to the claims report, 56 percent of claims lasted fewer than 30 days, but 60 percent 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,” Smit said.
“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,” he added.
During 2021, less than 2 percent of income protection claims lasted longer than 24 months. Of those, Bidvest Life’s said its experience has shown that one could expect four out of 10 of the long-term claims to not be permanent and would, therefore, not result in a payment on lump sum disability cover.
It said that showed that there were many injuries and illnesses that impacted one’s ability to work that would not result in a claim on lump sum disability cover.
Despite that, most policies sold in the industry in 2021 did not include income protection. Life-cover benefits dominated sales in the life insurance market, representing 78 percent of new sales. The remaining 22 percent was divided among disability cover (7 percent), critical illness cover (8 percent) and income protection (7 percent).
The insurer said that in stark contrast to the industry trend, nearly half of Bidvest Life’s policies sold (47 percent) were for income protection, followed by life cover (33 percent).
Smit said financial planning should start by asking: “How will I provide for myself and my dependants if I get ill or injured and I can’t work?”
“At Bidvest Life, we’ve always believed that 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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