/ 28 March 2024

Life insurers paid close to R600 billion in claims in 2023

Business And Finance, People Working
Life insurers paid out close to R600 billion in claims last year.

Life insurers paid out close to R600 billion in claims last year. This was the second-highest amount since 2020’s Covid-induced claims spike, according to the Association for Savings and Investment South Africa’s (Asisa’s) Gareth Friedlander.

Friedlander, who serves on Asisa’s life and risk board committees, spoke to the Mail & Guardian after the industry organisation released data showing that life insurers paid R599 billion in claims and benefits in 2023 — R21 billion more than in the year prior.

Long-term insurance statistics showed that the life insurance industry managed assets of R4.08 trillion at the end of December 2023, the first time the industry has reported assets above the R4 trillion threshold.

“The industry has shown growth and stability to deliver on promises,” Friedlander said. 

He said it should bring a lot of comfort to consumers that the industry can pay out and meet promises. “[W]e will remain very well capitalised going into the future. If I was reading these numbers as a consumer I’d be very comforted.” 

Old Mutual was recently embroiled in an alleged nonpayment of a pension claim that sparked widespread anger on social media. The social media user alleged that her mother was having trouble getting her pension money from Old Mutual, causing other policyholders to slam the insurance company for alleged non-payment. 

After the social media storm, Old Mutual released a statement saying it takes pride in honouring valid claims. The insurer said it pays more than R100 billion in investment and claim benefits annually, assisting nearly one million individuals.

Nceba Sihlali, of the National Financial Ombud Scheme’s life division said that iIn the case of improper nonpayment, policyholders can turn to the ombudsman, he said. “We are here for consumers to know where to go in the event they run into trouble with their insurers.” 

Insurers also understand that if they decline or delay payment, consumers have the right to go to the ombudsman, he said. The ombud can order the insurer to pay declined claims and mandate them to compensate policyholders or refund premiums. 

The Asisa data showed that the bulk of risk policies bought in 2023 were funeral policies. In that year there were 9.97 million new individual risk policies and 5.59 million of those were funeral policies. In 2022, some 9.19 million risk policies were sold, of which 4.39 million were funeral policies.

Risk cover is long term insurance that ensures a monetary return if the person insured succumbs to disability, critical illness or death.

Friedlander said the reason funeral policies form a big part of the basket of risk policies is they appeal to the mass market. They are also prominent because they are more affordable. Nedbank, for example, offers funeral cover worth R30 000 for a premium of R50 a month.

Added to this is that clients have multiple funeral policies, he said. 

“It is a big and growing market, an important market. The funeral market has been very successful, growing in footprint and providing a real need.” 

Friedlander says 8.25 million risk policies lapsed last year, a slight reduction from the 8.33 million policies lapsed in 2022. A lapse occurs when the policyholder stops paying premiums for a risk policy with no fund value.

“While even a slight reduction in the lapse rate is good news, policy lapses are

concerning. With every risk policy lapsed, South Africa’s sizeable insurance gap widens

even further, leaving more families financially vulnerable,” he said.