Leading financial services group Liberty recently reported that at least 24 percent of the claims on life policies recorded in the Free State last year were to cancer, the highest proportion in the country. Liberty also reported that there was a marked increase in musculoskeletal diseases and disorders also recorded.
This refers to injuries or pain to the joints, ligaments, muscles, nerves, tendons, and structures that support limbs, neck and back. Also in the country’s central region in the Northern Cape, the highest cause of claims was cardiac and cardiovascular, while the most unfortunate cause for claims was suicides among farmers older than 55.
The Weekly’s Martin Makoni spoke to Liberty’s Head of Risk Product Management Henk Meintjes about these figures and what they meant given today’s living conditions. Makoni also asked Meintjes about the importance of taking up security given the rising the rising cost of living and limited disposable income particularly in the medium income group. Excerpts:
South Africa is presently experiencing a tough economic environment but at the same time there is need to prepare for life’s uncertainties. How would you describe insurance penetration in the country and the Free State in particular, are people adequately covered?
Well, if you look at the insurance penetration in South Africa, you will note that people are generally under-insured. Even when we look at third party motor insurance for drivers on the road, the feeling is that it is probably less than it was a while back. So, definitely we are concerned that people don’t necessarily understand the benefits resulting in them not buying it.
Long-term insurance specifically, recently studies have shown that the country’s employed population of about 11 million people has only bought about 40 percent of what they actually need.
That’s quite an alarming figure and a lot of people hear that figure and they think, well, if other people are under-insured, it’s probably okay if I’m under-insured as well. It’s a herd mentality that we normally experience but that doesn’t make it right.
But what does that 40 percent insurance uptake mean to the working population? Does it in anyway make the situation better in terms of life security or it remains steeply inadequate?
If you take for example, the top 20 percent of income earners in the country, you will find that in a household, if an income earner dies, that household would lose on average, 36 percent of their income.
This is regardless of the fact that there can be more than one income earner in a given household. As a result the household could be left partially insured because it usually becomes impossible for that household to earn additional income to maintain their quality of life.
So, really the idea of not providing cover and looking for some solutions after an event has happened isn’t viable. But if we look at what would have cost us to place cover for those people to the full extent, it would cost an additional 3.3 percent of their salaries. Now, that is not an insurmountable figure. I believe we can still penetrate that market and get full cover.
So, what could be the reason for the high rate of under-insurance in South Africa? How much does the lack of disposable income play a role in this?
I think it has a lot more to do with financial education. I think if we look at the level of savings and the level of insurance being bought, people are spending a lot more on luxuries such as satellite TV bouquets and going out to coffee shops than on important things.
And if we add this up, it could be quite a significant portion of our salaries. Like I said earlier, just 3.3 percent of your salary is enough to make sure that your family’s financial status will be maintained should something happen to you. I think most of us would happily give that up, but that needs some education first so that people fully understand the importance of securing one’s life.
But you have some people that would argue that financially, my hands are full. Besides my spouse and kids, I have an extended family to look after. Why should I really worry so much about life after death and not the present situation where I have so many mouths to feed, how do you respond to that?
I would like to re-phrase the question to say, should I look after my family after my death rather than looking after myself after my death? The rationale there is probably that, yes maybe it feels like everything you earn is currently necessary for your lifestyle but is it sensible to make your family accustomed to that lifestyle only for them to lose it all if something was to happen to you? So,
maybe it does make more sense in the long run to have a review of your lifestyle right now if possible and putting some money aside to ensure that their lifestyles can be maintained if something happens to you. You need to strike a balance and it may be advisable seek help from a qualified financial advisor.
So, when is it best to take out insurance, maybe in terms of age?
If we think about it clearly, it’s difficult to take out insurance if you cannot afford it.
This means you should take out insurance once you start earning an income. The earlier you take out an insurance the better because these events can happen to you anytime. And besides the events, something could happen to you to make you uninsurable.
It could be too late to take out insurance once you have had a heart attack or once you have been diagnosed with cancer because quite often, the premiums will loaded or an exclusion will apply. It is also possible that you may actually not get cover at that stage.
What would attribute the high rate of suicides recorded last year to, and do you as insurers offer some kind of counselling to your clients in a bid to reduce such eventualities?
I think it’s a very good question and most of our advisers play the role of counsellors… as leaders within society.
The engagement you can have with a Liberty financial advisor and or broker really goes far beyond just the risk cover that you need. They actually engage you on a personal level and understand your circumstances and try to help you as far as they can through that.
South Africa was recently downgraded by two international ratings agencies and this is expected to have a significant impact on the economy.
If you can please paint a picture, first on the part of the client, how is downgrading likely to affect those insured and those that are not? And you as a company, how is the downgrade likely to affect you?
I suppose your risk of something doesn’t necessarily change with economic circumstances directly or immediately. If we do end up with reduced consumer or business confidence which leads to a deepening or worsening of the economic circumstances, I think that will bring additional stress on our lives.
And stress, certainly is directly linked to harder events and other health events which of course, lead to claims. So, I think if you are concerned about your health and your wellbeing as a result of the economic pressures, certainly thinking beyond just making sure you have got a good work-life balance but thinking also that some things come even though you try to avoid them, hence the need to have cover in place. In terms of how it will impact Liberty, it’s difficult to say. Clearly we will need to engage our consumers far more in terms of making them aware of the cover that they need.
The more pressure there is on our wallets, the more difficult it is to convince people of the need for cover. But overall, we work through the economic cycle and we have economists and other experts studying these aspects and advising us.
What would you say to someone contemplating on whether to take out a policy given the current economic situation and at what point in life should they do it, what would you say to them?
Well, I think for you people we often feel less likely to have a claim event but what’s important is to note that premiums are directly linked to your relative risk at least by age, gender and even smoker-status. So, even if you are at a lower risk, you are benefiting from a premium.
So, again the earlier you put the cover in place, the more likely the cover will be there when you need it.