Non-disclosure was the leading cause for denied claims made against fully underwritten life policies in South Africa last year.
The Association for Savings and Investment South Africa (ASISA) reported that in 2012, life companies paid 99% of all 2012 claims made to the value of R6.8 billion.
Death benefit claims statistics for 2012 were submitted by the 12 long-term insurance companies. The statistics showed that in 2012 these life insurers honoured 34 724 death benefit claims and declined 352.
According to Peter Dempsey, deputy CEO of ASISA, this is the first time that consolidated death benefit claims statistics are available in South Africa.
Of these denied claims 70.34% were caused by non-disclosure while suicide made up 20.11% of the denied claims. Underwriting exclusions made up 6.13% of the declined cases while 3.42% of these cases were denied because of fraud.
“Non-disclosure refers to the deliberate failure of policyholders to disclose information about a medical or lifestyle condition, which is material to the assessment of the risk to be insured. An example would be if the policyholder does not disclose that he or she participates in dangerous sports or suffers from a serious condition such as diabetes or cancer,” says Dempsey.
Dempsey explained that since the person applying for life cover knows more about the risk to be insured than the insurer, the law compels applicants to honestly disclose all information likely to influence the judgment of the insurer when determining appropriate policy terms and premiums. Dempsey added that policyholders usually resort to non-disclosure in an attempt to secure lower premiums or to obtain cover without exclusions.
But being HIV positive need not be an illnesses policy holders should fear disclosing to potential life insurers. Specialised insurers like Altrisk cater for HIV positive clients. Altrisk was the first insurer in South Africa to cover HIV positive clients in 1999.
According to Dalene Allen, underwriting director of Altrisk, millions of HIV positive people are living longer and over the years HIV has become similar to a chronic illness like diabetes.
“In 13 years, we have only had two HIV life claims – a trend that echoes the research coming out of the reinsurers,” says Allen.
Compliance is key When assessing an application to cover an HIV positive person, strict compliance with the ARV programme is one of the biggest considerations for insurance companies.
According to Allen, compliance is the single biggest factor in ensuring the HIV sufferer does not become drug-resistant and run the risk of progressing to Aids. “Altrisk’s underwriters look at the applicant’s blood tests in terms of CD4 counts and viral loads. These measurements provide strong indicators in terms of ARV compliance, whether the applicant has become, or is at risk of becoming drug resistant and provides an overall view of how the disease is progressing,” says Allen.
Ensure that your claim is upheld
To avoid problems and ensure that your claim doesn’t get declined, ASISA offers the following advice:
•Always complete or review the application form, particularly the questionnaire on your medical history and lifestyle.
•Provide detailed information on your state of health and medical history as well as that of your immediate family.
•Disclose all medical information, even if you think it is not important. It is far better to pay the appropriate premium and have an exclusion added to the policy than to not disclose facts and have your claim repudiated.
•Be honest about your smoking and drinking habits.
•Disclose dangerous recreational activities such as skydiving and deep sea diving. Also, if your occupation involves risky activities you need to disclose these. Examples include mining, flying aircraft, and working with weapons.
•Shop around for risk cover and compare premiums as well as terms. One company’s premiums might be higher than those offered by another, but then you may find that in return the potential of future risks has already been factored in and you are not required to inform the company of lifestyle changes.
•Make sure you nominate a beneficiary. This enables the life insurance company to pay the proceeds of your life policy directly to your beneficiary, thereby bypassing the deceased estate (although you will still have to pay estate duty on the policy proceeds).