The Association for Savings and Investment South Africa (Asisa) – which represents the majority of the country’s asset managers, collective investment scheme management companies, linked investment service providers, multi-managers and life insurance companies – says life insurers reported a huge increase in death claims when Covid-19 infections and deaths surged during May to September 2021.
Read: Insurers build war chest to manage fifth SA virus wave
Life insurers reported a 53% surge in death claims during the six months to end September which included the third wave of Covid-19 transmissions, says Hennie de Villiers, deputy chair of Asisa’s life and risk committee.
He presented statistics during a presentation showing that life insurers received more than half a million death claims – at 565,522, closer to 600,000 – between April and September 2021. During the same period in 2019, life insurers received 369,892 death claims.
Thus, insurers reported nearly 200,000 more deaths than normal (if one takes the 2019 number as ‘normal’).
De Villiers says not every death for which claims were submitted would have been caused by Covid-19, nor would the extra 200,000 deaths. “There is no doubt that the pandemic has been responsible for many of the additional deaths, whether directly as a result of a person contracting the virus or because people were reluctant to seek medical attention for other serious conditions,” he says.
Asisa’s statistics show the same thing as the weekly mortality figures published by the South African Medical Research Council (SAMRC).
SAMRC figures have shown that the Covid-19 pandemic caused more deaths, directly and indirectly, than the official death statistics claim.
The council says in its recent report that one approach to aid understanding of pandemic mortality is to compare the estimated weekly excess deaths with the number of Covid-19 deaths reported by the Minister of Health.
“This comparison is hampered to some degree by the fact that the excess deaths are classified by [the] week in which the death occurred and the reported Covid-19 deaths are classified by date when reported to the Department of Health.
“If all excess natural deaths were due to Covid-19, and all Covid-19 deaths were perfectly identified and reported, the two series would be identical,” says the SAMRC in its report.
That deaths are significantly higher than expected, but excess deaths increase whenever there is a spike in Covid deaths, meaning that some Covid-19 deaths are not reported. Alternatively, the pandemic causes a spike in deaths due to other reasons.
The graph shows a strong correlation between the so-called Covid-19 infection waves and excess deaths, with the SAMRC saying that excess deaths have begun to decrease in line with the decrease in confirmed Covid-19 deaths.
“Although more data are needed on the underlying causes of death, this observation is strongly supportive that a significant proportion of the current excess mortality being observed in South Africa is likely to be attributable to Covid-19,” concludes the SAMRC.
Value of life claims
The Asisa report discloses that while the number of life claims increased by 56% during the six months under review, the value of claims more than doubled. In the latter period, the value of claims increased by 127% to R44.4 billion compared to R19.5 billion in the same months in 2019.
De Villiers says the third wave of infections and deaths was much worse than the first and second wave.
In the 12 months to end-March 2021, life insurers reported a total of 1,023,083 death claims to a value close to R47.7 billion, according to Asisa.
“This represented a 43% increase in death claims compared to the same period in March 2020 and a 64% increase in rand value, demonstrating that the third wave was significantly more severe than the first two waves of the pandemic,” says De Villiers.
“In total, 1,588,605 death claims were received in the 18 months from April 1, 2020 to September 30, 2021. Life insurers paid out benefits of R92 billion to the beneficiaries who submitted these death claims.”
De Villiers says that while not every death for which a claim was submitted would have been caused by Covid-19, there is no doubt that the pandemic has been responsible for many of the additional deaths, whether directly as a result of a person contracting the virus or because people were reluctant to seek medical attention for other serious conditions.
De Villiers notes that behind every death claim are real people who are suffering the pain of having lost a loved one.
“We acknowledge that the payout of a death benefit cannot take this pain away. However, it can alleviate the financial hardship that often follows the loss of a breadwinner, ”he says.
“The R92 billion in death claims paid came at a time when the pandemic resulted in massive job losses and the country’s economy was struggling as a result of reduced consumer spending due to restrictions.”
He adds that the significance of the R92 billion in death benefits paid to dependents becomes clear when you consider that the government paid out R60 billion through its Temporary Employee / Employer Relief Scheme (Ters) during the same period.
De Villiers says we must guard against becoming complacent with regards to the pandemic, considering the staggering number of death claims submitted over a short period of only 18 months.
“While the death rate has been lower during the fourth wave than in previous waves due to vaccinations and the emergence of the omicron variant, death claims rates have not yet returned to pre-pandemic levels.
Read: South African excess deaths back to levels seen before Omicron
“Also, less than 50% of our adult population has been vaccinated,” says De Villiers.
Life insurers expect the relatively higher rate of death claims to continue until South Africans start embracing vaccinations.
“There is overwhelming evidence that the risk of severe illness or death is significantly lower in those who are fully vaccinated,” states the report.
Asisa also warns that consistently higher claims will leave insurers with little choice but to adjust premiums in line with the higher risk of insuring the lives of people who are not vaccinated and “therefore more likely to die from Covid-19”.
De Villiers says premiums have already increased for group life insurance schemes, but employers that have implemented mandatory vaccination policies are benefitting from preferential premium rates.
He says the life insurance industry remains resilient and able to support its policyholders and their beneficiaries despite the significant increase in claims. “The SA life insurance industry held assets of R3.71 trillion at the end of 2021, while liabilities amounted to R3.36 trillion.
“This leaves the industry with free assets of R350 billion, which is nearly double the capital required by solvency capital requirements,” says De Villiers.
Read: Simplifying a long Covid-19 insurance claim