Policyholders paid R230bn in claims and benefits during lockdown

Life policyholders received R230 billion in claims and benefit payments during the initial period of the Covid-19 crisis, according to the Association for Savings and Investment South Africa (Asisa).

This figure came from its half-year to end-June long-term insurance statistics, gathered from Asisa members in line with regulatory reporting requirements introduced by the Insurance Act of 2018.

The R230 billion in claims and benefit payments is about R18 billion less than the corresponding figure for the prior six-month period.

The statistics also show that in spite of over 480 000 policyholders getting R1 billion in premium relief as a result of the crisis, the life industry remains financially healthy and well capitalised, says Hennie de Villiers, deputy chair of Asisa’s life and risk board committee.

Policyholders who had been struggling financially received relief payment holidays on policies of three to six months if they were suddenly unable to pay their monthly premiums due to Covid-19 – if they were in good standing.

De Villiers said from what he has seen, the majority of policyholders who were granted relief resumed their payments at the end of the relief period to ensure that their policies remained in force.

Crisis puts the industry under pressure

Though the relief is good news for policyholders, the crisis has taken a toll on the life insurance industry’s prospects.

This can be seen in 4.6 million new individual recurring-premium risk policies being signed up during the period, but more than 5.4 million lapsing. 

A lapse occurs when the policyholder stops paying premiums for a risk policy that has no fund value. Such instances saw the number of risk policies in force drop from 34.6 million at the end of December 2019 to 33.8 million at the end of June 2020. 

The pressure on South Africans can also be seen in 282 467 new policies being sold during the period, while 364 887 were surrendered.

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A surrender is when the policyholder stops paying premiums and withdraws the fund value before maturity.

De Villiers says that while this is concerning it was not surprising, given the impact of the Covid-19 lockdown on the earning ability of thousands of South Africans. 

“When times are tough consumers are less likely to take out new savings policies. At the same time, more policyholders surrender their savings policies to access their savings due to financial hardship.” 

The lockdown restrictions also capped life insurers’ ability to advise clients and to sign up new business.

Sector still strong

Even so, looked at as a whole, De Villiers says the industry is relatively healthy as it held assets of R3.1 trillion at the end of June 2020, while liabilities amounted to R2.8 trillion. 

This left it with free assets of R330 billion, which is more than double the reserve buffer required by the new Solvency Capital Requirements. The free assets of R330 billion are, however, about R44 billion less than the figure for the corresponding prior six-month period.

Nevertheless, De Villiers says having free assets of R300 billion implies that the insurance industry is well-positioned to deal with economic pressures exacerbated by the Covid-19 pandemic. 

“This means that we can give policyholders and their beneficiaries the assurance that the industry is well-positioned to weather this storm and that we will be able to honour every single valid claim,” says De Villiers.

Listen to Nompu Siziba’s interview with Marius Botha from Stangen Life (or read the transcript here):