How necessary is risk cover?

6 Jun 2018
Life can twist and turn in unexpected ways. You can’t predict the setbacks, but you can protect yourself from their fallout, which is why Old Mutual paid out R4.49 billion in underwritten risk cover claims in 2017, amounting to 96% of all valid risk cover claims received.

This is according to their recently released claim statistics, which show that in 2017 the top two reasons for claims were once again cancer and tumours (30%) and cardiovascular disorders (18%). Cancer, heart attack, coronary artery bypass graft (commonly referred to as CABG) and stroke constitute the ‘Big Four’ severe illnesses that account for 81% of all the severe illness claims paid. The youngest severe illness claimant was a 12-year-old girl.

The 2017 statistics also reveal that 99% of the severe illness claims were for conditions that Old Mutual covers at 100%. Overall, Old Mutual South Africa paid R10 billion in underwritten, non-underwritten and corporate claims in 2017, which equates to over R83 000 every working minute.

The statistics show that 95% of all valid disability income claims were paid, highlighting the importance for consumers to protect their income against illness or injury that could hamper their ability to work, even if it’s only for a temporary period. Furthermore, 75% of all disability income claims paid were from people under the age of 50 and claims from men accounted for 63% of all disability claims.

According to Jaco Gouws, Protection Product Head at Old Mutual, the 2017 statistics again demonstrate the importance of adequate protection. “Risk cover is about providing financial security for when you need it most. Having peace of mind that you are protected ‘when life happens’ is a priceless comfort. This is the recurring message that we hear every day from customers who benefit from the claims that Old Mutual pays out.”

Gouws says South Africans need to understand why these staggering amounts in claims were paid. “Most of us, understandably, don’t like to think of the many curveballs that life can throw at us. As a result, many tend to adopt the attitude that it won’t happen to them. However, our claims statistics show just how many things can, and do, go wrong. Protecting yourself from curveballs doesn’t make you a pessimist, it makes you a realist.”

Key take-outs from Old Mutual’s 2017 underwritten claims statistics for 2017:

  • Death cover claims paid: R 3.48 billion (99% of valid death claims)
  • Disability cover claims paid: R 412 million (82% of valid disability claims)
  • Severe illness and physical impairment cover claims paid: R 590 million (82% of valid severe illness and physical impairment claims)
  • Retrenchment cover claims paid: R 7 million
  • Claims according to gender: 58% male and 42% female

Gouws stresses the importance of customers getting the right advice from accredited financial advisers and taking the time to understand their cover, so they know what they are covered for and when to claim. This will help them avoid mistakes like submitting claims under the incorrect type of cover (e.g. submitting a claim for a broken arm under death cover), as well as submitting a claim when the cover no longer exists because it was cancelled or premiums weren’t being paid. “While only 4% of claims were declined in 2017, the majority of these declined claims were turned down because the event being claimed for did not meet the benefit definition,” he says.

Why 4% of claims were declined:

  • Benefit definition not met (72%)
  • Non-disclosure (17%)
  • Suicide exclusion (5%)
  • General exclusion (3%)
  • Underwriting exclusion (2%)
  • Fraud (1%)

Since 2005 Old Mutual has paid over R156 million in immediate cover claims - R26 million in 2017 alone. Immediate cover claims are paid before a customer has paid their first premium.

The main causes of death claims paid include cancer and tumours (26%), accidental death (22%), cardiovascular disorders (21%), respiratory system disorders (10%) and central nervous system disorders (7%). Of the death claims paid, 66% were for males and 34% for females. A total of R173 million was also paid in terminal illness claims. This means that customers diagnosed with a terminal illness received their death cover pay-out early.

“Protecting personal income is vitally important and remains one of the cornerstones of any holistic financial plan,” believes Gouws. “Many South Africans want to trim their monthly overheads, but risk cover is not something they should consider cutting out. Risk cover is essential and a prudent investment whether you’re a breadwinner or a young professional; it’s comforting to know that those you care about will not be financially burdened if you pass away or become ill or disabled. The billions of rands paid out in claims are not just numbers, but an example of how Old Mutual keeps its promise of being there when their customers need them most.

“Consulting a professional financial adviser will ensure that you get the right cover for your needs,” says Gouws. “A holistic financial plan that includes risk cover will ensure you are on the path towards achieving financial wellness. If something happens, you will have the financial means to recover without having to dig into your savings or going into debt,” he concludes.