The uncertainty in South Africa is taking its toll on our bodies, and possibly our insurance premiums.
Over the last year, long-term insurers have experienced higher-than-expected claims ratios, especially when it comes to stress-related illnesses and death.
Henk Meintjes, Head of Risk Product Development at Liberty says their 2016 claim statistics show an increase in stress-related claims such as cardiac and cardiovascular diseases and disorders, and suicide. Looking at income protection claims, musculoskeletal diseases and disorders (often in the form of chronic backache) and mental illness also increase during economic hardship.
Meintjes says the severe drought would also have had a significant impact in farming communities and noted that of the confirmed suicides in the Western Cape which led to claims in 2016, most were farmers over the age of 55.
Contributing factor to cancer
While it is more difficult to link cancer claims directly to stress, stress can be a significant contributing factor to incidences of cancer which continue to rise at an alarming rate. According to Liberty’s recent statistics, cancer accounts for nearly a quarter of all claims. For women over the age of 30, the number of cancer claims rises to one in every three claims.
John-Henry Horn, Life Claims Specialist for re-insurer Munich Reinsurance Company of Africa Limited, says it is generally accepted that the disability claims incidence correlates with the economic cycle, which means significantly more claims are lodged during a recession or slower economic growth period. Although good claims management by an insurer can limit the financial impact of false claims, back-pain and psychological claims require more subjective criteria which can result in more claims being paid.
Dawie de Villiers, CEO of Sanlam Employee Benefits says when it comes to corporate group cover, they are experiencing an increase in claims such as disability due to backache, as well as mental issues. “We are seeing more claims, larger claims and longer duration on disability, all affected by the economy,” says de Villiers.
If you are financially secure and enjoying your job, you are less likely to experience physical pain such as backache or suffer from depression. If, however you are stressed about money, politics and your job security, that stress will manifest itself physically.
Backache related to stress
Cape Town based chiropractor Rob Beffa says his practice is seeing significantly higher cases of back spasm which directly relate to stress. “Your body can cope better with physical stress if you are enjoying your job. While sitting at a desk behind a computer all day may put stress on your back, if for example you are a gamer developing a new online game and that is all you want to be doing, your tolerance for sitting in that position would be much higher than someone managing outstanding creditors, for example.”
The bottom line is that the less stress you feel, the more your body can cope with its environment. As the financial impact of the weaker economy, as well as South Africa’s politics, takes its toll on us emotionally, we see its physical manifestation in illness and pain.
De Villiers says from the perspective of a group employee benefits scheme, employers are also more likely to sign off on disability claims in a recession as this is a way to reduce head count without actual retrenchment. Horn says the re-insurer has seen instances of employers apparently completing the medical incapacity process and submitting disability claims rather than following a retrenchment process. “It is however not possible to state exactly how common it is. This only becomes evident to the individual assessors across the industry, and there is no central reporting of such instances,” says Horn.
Insurers are also experiencing a trend where once a person is off work on temporary disability, the company is less likely to encourage them to return to work.
Extended duration of disability claims
Horn says some companies complete a medical incapacity process early on, discharging individuals for medical incapacity, even if the insurer might consider potential return to work. “This creates more certainty at employers in terms of their payroll expenses, but makes return to work very difficult,” says Horn.
He adds that the changes to tax regulation in South Africa may also have a role to play in the extended duration of disability claims. “Tax regulation in South Africa changed in 2015 and this resulted in claimants’ benefits no longer being taxable. The increase in net benefits is thought to incentivise policyholders seeking to claim, and disincentivise them from returning to work, although it is currently too soon after the tax change to confirm this.”
De Villiers says the experience for their corporate cover is that the length of time for disability claims has been increasing. “Apart from a greater number of claims, we are seeing the length of time for disability claims extending,” says de Villiers, who explains that this means insurers need to keep more money in reserve.
The problem is that if this trend continues it will start to impact our insurance premiums. De Villiers says in the group scheme environment, the insurer can pass on the increased costs fairly easily through higher annual increases to the company, however, it may take a bit longer on the individual retail side to see this increase as policy-holders often have a premium guarantee for a period of time. If the economy does start to pick up and our politics are positively resolved, then hopefully our premiums will remain unaffected. However, if the current environment continues for much longer, we will all be in more physical pain and experiencing greater illness which will ultimately cost us more in insurance premiums.
This article first appeared in City Press.