Over the past year, long-term insurers have experienced higher-than-expected claim ratios, especially when it comes to stress-related illnesses and death.
Henk Meintjes, head of risk product development at Liberty, says last year’s claim statistics for individual business 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), as well as mental illness, also increase during times of economic hardship.
Meintjes says the severe drought will also have had a significant effect in farming communities, and noted that, of the confirmed suicides in the Western Cape that led to claims last year, most were farmers older than 55.
While it is more difficult to link cancer claims directly to stress, it can be a significant contributing factor to the incidence of cancer, which continues to rise at an alarming rate.
According to recent statistics from Liberty, cancer accounts for nearly a quarter of all claims. For women older than 30, the number of cancer claims rises to one in every three.
John-Henry Horn, life claims specialist for reinsurer 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 during a slower economic growth period.
Although good claims management by an insurer can limit the financial effect 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 that, when it comes to corporate group cover, Sanlam is experiencing an increase in claims such as disability due to backache, as well as mental issues.
“We are seeing more claims, larger claims and a longer duration on disability, which are 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 or suffer from depression.
If, however, you are stressed about money, politics and your job security, that stress will manifest itself in you physically.
Cape Town-based chiropractor Rob Beffa says his practice is seeing significantly more cases of back spasm, which directly relates 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 do, your tolerance for sitting in that position will be much higher than for someone who is managing outstanding creditors,” he says.
The bottom line is that the less stress you feel, the more your body can cope with its environment.
As the financial effect of the weaker economy and South Africa’s political turmoil takes its toll on us emotionally, we see its physical manifestation in illness and pain.
De Villiers says that, from the perspective of a group employee benefits scheme, employers are also more likely to sign off on disability claims in a recession because this is a way to reduce the employee head count without going through the retrenchment process.
Horn says the reinsurer 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 due to temporary disability, the company is less likely to encourage them to return to work.
Horn says some companies complete a medical incapacity process early on, discharging individuals for medical incapacity even if the insurer might consider a potential return to work.
“This creates more certainty at employers in terms of their payroll expenses, but makes a return to work difficult,” says Horn.
He adds that the changes to tax regulations may also have a role to play in the extended duration of disability claims
“Tax regulations 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 too soon after the tax change to confirm this.”
De Villiers says 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
He explains that this means insurers need to keep more money in reserve.
The problem is that, if this trend continues, it will start to affect our insurance premiums.
De Villiers says that, 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, our premiums will hopefully remain unaffected.
However, if the current environment drags on, we will all be in more physical pain and will experience greater illness, which will ultimately cost us more in insurance premiums.