Retrenchments accounted for the biggest share of monthly income claims paid out by Liberty in the 2018 financial year.

The group paid R20.5m, which is 38.3% of all monthly income claims it received in 2018, to 1,102 retrenchment victims.

Liberty is one of the insurers who provide income protection for retrenchments. The company  said it has seen the need for this cover increase over the past few years and even banks were starting to offer it.

Figures released by Statistics SA in its latest Quarterly Labour Force Survey for the first quarter of 2019 showed that unemployment in the country climbed to 27.6% from 27.1% the previous quarter, while the expanded definition of unemployment which includes discouraged work seekers pushed it to 38%.

Mining companies including Anglo Gold Ashanti and Impala Platinum retrenched more workers in 2018. Earlier in 2019 it became clear that even the services industries — which seemed immune to macroeconomic downturn in the past — may start retrenching when Standard Bank announced that it is planning to close about 91 branches as it digitises more of its operations.

“It is projecting the state of the economy. We all have our hopes pinned on things improving,” said Liberty’s Ursula Torr.

The monthly income claims related to retrenchments made up just 0.44% of total of R4.7bn claims paid by Liberty in 2018. The other most prevalent reasons for monthly income claims were disorders, cancer and trauma.

With increasing unemployment and more companies contemplating retrenchments, the question is how sustainable it will be for insurers to continue offering this type of cover. Torr said she expects companies to continue offering it in the foreseeable future, capitalising on the growing need for retrenchment cover.

“Given the size of the need, I think we’ll continue to offer it but the question is at what price? We do see it in bank products as well now, but it’s one of the most reinsured products,” she said.

Liberty became the first insurer to officially release its claims statistics for 2019. Sanlam which is yet to release its full statistics paid out R3.9bn in total claims and Liberty R4.9bn. Statistics from both companies show that they have been paying a higher amount of claims each year. While Torr attributed that to more people buying insurance, the insurers are also paying out more for lifestyle-related claims than they used to in the past.

Life cover, which is paid out when a person dies, still accounts for the lion’s share of the amount paid out — R3.25bn for Sanlam and R3.3bn for Liberty. But when broken down in terms of number of claims instead of value of claims, Torr said 69.2% of Liberty’s claims were paid to people who survived different illnesses or traumatic events.

Etienne Rossouw who is in charge of pricing at reinsurer Munich Re, said insurers had become more worried about people who survive illnesses like cancer and stroke than they were about those who die as the number of survivors continues to increase.