Post-pandemic life insurance - are you ready?

12 July 2022
5 minute read

The day finally arrived! At the end of June, masks were no longer compulsory and the last of South Africa’s lockdown restrictions were lifted! It’s great to welcome the return to a more normal way of life, but with the impact COVID-19 had, the question many clients are asking is will there be changes to my insurance policy? We chatted to the experts at 1Life to find out!

The effects of COVID -19 were far-reaching

COVID-19 had a devastating impact on the country
Over 100 000 people lost their lives, according to official statistics, although the number could be over 300 000 when taking excess deaths into account. Livelihoods were affected when jobs were lost or salaries reduced, and children lost valuable learning time at school. The pandemic has been a really difficult and tough time for South Africans.

Death claims increased 127% in the third wave
The life insurance industry saw the impact of the pandemic firsthand. In the first two waves of COVID-19 (April 2020 to March 2021), death claims increased by 64% in rand value, according to the Association of Savings and Investment South Africa (ASISA). The third wave, (April 2021 to September 2021) saw death claims increase by 127% in rand value. In the same six months in 2019, prior to COVID-19, insurers received just under 370 000 death claims. During the third wave, there were over 565 000 death claims.

The amount paid out to beneficiaries for death claims, including life and funeral cover policies, was over R44 billion – just in the third wave alone. Although times were tough financially, the importance of life insurance and funeral cover was never more evident.

Good to know: Insurers are required to have enough reserves on hand so they can pay all valid claims – especially when there are excess claims as happened in COVID-19. Think of this as cash in the bank so unforeseen expenses can be paid. South Africa’s life insurers continued to pay well over 95% of all claims throughout the pandemic, as they did before and still continue to do.

COVID-19 and your policy

Because COVID-19 had such a big impact on our lives and the insurance industry, there are some areas where it may affect your existing policy, and new life insurance policies.

Your cover
The cover for life and funeral cover policies has not changed. Death due to COVID-19 is classified as death due to a natural cause, which means all policies that cover death due to a natural cause cover COVID-19. It is possible that there may be future pandemics, with some experts saying pandemics may occur more frequently. However, death from these would most likely be from a natural cause, which would mean you would be covered for future pandemics as well.

Good to know: The purpose of life cover is to ensure that your family and loved ones are financially provided for on your passing. That means insurers will cover as much as possible!

Your premium
Given the huge impact COVID-19 had, and to allow insurers to build up reserves so they can pay all future claims, it is possible that annual premium increases may be higher than before the pandemic. At this stage, actuaries are reviewing policies, calculating the risks and the numbers. 1Life, and indeed all insurers, are very aware of how stretched budgets are and will keep premiums as affordable as possible. In addition, each life assured has their own unique risk, which is taken into account when calculating premiums and premium increases.

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How you can prepare

COVID-19 can not only be devastating, but it can also severely dent your pocket at a time when you can least afford it! Your best chance of avoiding the high costs of COVID-19 and keeping your premiums and premium increases as low as possible is to:

1. Vaccinate
Vaccination against COVID-19 is highly recommended as it is an effective way to prevent severe illness and death – especially if you have a co-morbidity such as high blood pressure or diabetes. Insurers see those who have been vaccinated as a better risk (likely to live longer than and with a smaller chance of severe COVID-19) than an unvaccinated person.

Vaccination will also make a difference to the premiums when a new policy is taken out, or you increase your cover. If you compare two lives assured who are similar in age and enjoy good health, but only one is vaccinated, the vaccinated life assured will have a lower monthly premium.

2. Keep screening for serious illnesses
One of the lingering impacts of the coronavirus pandemic has been the drop in preventative testing and screening – especially for illnesses such as cancer. In 2020, this was quite difficult because our movement was restricted. Now that restrictions have been lifted, screening and preventative testing can resume. Many illnesses diagnosed early can be treated and managed, with little impact on your life. Wait too long and complications may set in, treatment and care become more expensive and long-lasting, and sadly, may lead to an early death.

3. Keep healthy
Managing chronic conditions, not smoking, as well as reaching and maintaining a healthy bodyweight will make your premiums more affordable. And remember, if you stop smoking or your health improves (and you have been vaccinated) you may be able to qualify for a lower premium! Make sure you contact 1Life if your health metrics change, such as you stop smoking or reach a healthy bodyweight.

4. Review your financial plans
The costs of having COVID-19 can run into the thousands. You may need specialist medical care, for a long period of time, which means you could lose your income. Review your financial plans to see how you can add additional emergency savings into your budget and ensure you have suitable insurance – including life and funeral cover!

COVID-19 taught us many lessons, the most important is this: our families matter most! We can prepare financially for the future and protect our families by having emergency savings and investments, and by taking out life insurance. Life insurance is one of the simplest and most cost-effective ways to build generational wealth and change your family’s life for the better.  Find out more about how you can build your Generational Wealth plan here.

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