Sanlam (SLM), South Africa’s second largest financial services group, on Tuesday warned that the HIV/Aids pandemic is not only a human tragedy but also an economic time bomb that poses a major threat to the profitability of companies countrywide.
This warning is based on the findings of Sanlam’s biennial survey on retirement benefits in South Africa. Sanlam employee benefits actuary Danie van Zyl says the survey shows that employers are increasingly becoming aware of the disturbingly high cost of HIV/Aids on their profits.
“Although the financial consequences for employers are the less visible impact of the HIV/Aids pandemic, these can be measured in lost productivity, absenteeism, recruitment, and the cost of training replacements that have to take place of staff lost as a result of the disease. Some health management consultants estimates this cost to be as high as 5% of salary in some cases,” Van Zyl says.
The survey also shows noticeably increased concern by most South African companies about the impact of HIV/Aids on the business. Van Zyl notes that the latest figures indicate that approximately one out of every four persons that visit prenatal clinics in South Africa is HIV positive.
The survey found that the most visible impact of HIV/Aids on employers is still their group life and disability insurance costs. Van Zyl explains that as the number of death and disability claims increases, insurers have no option but to raise the cost of their group life and disability insurance premiums.
“Since our previous survey two years ago, there has been a marked change in our respondents’ views on this,” he says.
The survey also reveals that a total of 62% of the respondents (compared with 30% in 2002) believe their group risk rates have increased during the past two years owing to HIV/Aids.
The estimated increase is between 10% and 19% compared to an estimated 10% in 2002.
A total of 72% of the respondents believe that their group risk rates will increase within the next two years as a result of HIV/Aids.
“If one compares the 2002 survey and that of 2004, the uncertainty among respondents about future increases in group life and disability insurance premiums is clearly noticeable.”
“It is this type of uncertainty that makes life difficult for employers,” says Van Zyl. This is confirmed by the fact that only 23% of the respondents indicated that the employer has implemented an HIV/Aids management programme.
“Although many of them are expected to consider such a programme, it is alarming that the majority are still adopting a wait-and-see attitude and are weighing up the probable costs and benefits, as if they still have lots of time.”
He cautions that employers should call for expert actuarial assistance to help them model the likely impact of HIV/Aids on group risk benefits.
“HIV/Aids is not only a human tragedy — it is also an economic time bomb. Time is running out and it is imperative for companies to discuss this issue with experts.” ‒ I Net-Bridge