Werner Bothma, Oak Tree Intermediaries
It is difficult to have a life and accumulate wealth without maintaining your health. However, it is becoming increasingly more expensive to acquire proper health care in South Africa, which is placing strain on state funded hospitals.
This problem is only exacerbated by the COVID-19 pandemic. Yes we know, everybody is tired of talking and hearing about this pandemic. Halting our normal lives and stunting economic growth, but it is now part of our lives and (it seems) will be for the foreseeable future, unless we achieve that fabled heard immunity…
Now we are not going to try and change your mind regarding the vaccine, however, one life insurer on the other hand seems to be taking a stance against citizens who are choosing not to vaccinate against COVID-19. This life insurer is the first in South Africa to apply these new underwriting rules to their life policies and will result in increased premiums on life offerings for new applicants, while current life policyholders who choose not to vaccinate will not be affected by these new underwriting rules and policy price increases. These kinds of increased premiums have always been applied to the lifestyle diseases like diabetes and people that smoke, due to the higher risk of death and the same would apply for the unvaccinated. Worryingly, Discovery Life data showed that “an average 75-year-old who is fully vaccinated, has a similar risk of dying from COVID-19 to a typical 40-year-old who has not been vaccinated”.
What we have noticed during the trying July 2021 reinsurance renewals, is that the life business has taken a large hit with regards to mortality claims as the COVID pandemic plays itself out on our population. This is placing enormous strain on reinsurers and increasing the challenge of placing new group life risk and credit life schemes in the reinsurance space. One possibility that could assist with future reinsurance life treaty placements, is more stringent underwriting practices on life insurance policies, and this is exactly what one life insurer is considering. Are we going to see more of these non-vaccination exclusions from other life insurance providers as well? With current figures already sitting at R47.6 billion from South African life insurers’ settled claims for the year through March, what do you think?
Before you think that South Africa is suffering because we don’t have the same access to vaccines and technology to effectively combat the pandemic as other first world countries, news is that there has been a big resurgence of COVID-19 cases in the USA, especially amongst nursing homes in Texas. These nursing homes have seen a 773% rise in active cases of COVID-19 in patients during the past month. Focused Post Acute Care Partners, a nursing home in Texas, says that they respect the choice of individuals not to get the vaccine, however they continue to educate and re-educate infection control practices to combat the spread of the virus.
If we are seeing the rise of premiums in the life insurance sector, would it be safe to assume that the health sector will also raise premiums? Preliminary reports would suggest that this could indeed be the case. Every year the Council of Medical Schemes (CMS) publishes guidelines regarding medical aid scheme contribution increases. These contribution guidelines are based on global macro-economic outlooks, which includes member hospitalisation trends as well as the effects of the COVID-19 pandemic. For 2022, the CMS suggested to cap premium increases at 4.2%, which would be in line with the Consumer Price Index projected by the National Treasury. This, however, is only a guideline and medical aid schemes can choose not to adhere, or rather we can only hope that they adhere.
“Momentum Life Insurance pays out R1.4bn for Covid-19 related death claims”
“Insurers likely to pay R25bn more in claims than expected as 3rd Covid-19 wave wreaks havoc”
“One million SA policyholders died in a year – 300 000 more than usual, insurers report”
These are just some of the news headlines looming around from the past weeks, and they are not reassuring in the slightest if we are already seeing talks (and actions) of increasing premiums in the life insurance sectors. Can you really expect a business to continue as they have previously done when the data and claims are stacked heavily against them?