Insurers will always pay death claims against fully underwritten life policies, provided the claim is not fraudulent and the policyholder did not commit suicide, withhold important information or die as a result of an exclusion. Picture: 123RF/ALLAN SWART
Insurers will always pay death claims against fully underwritten life policies, provided the claim is not fraudulent and the policyholder did not commit suicide, withhold important information or die as a result of an exclusion. Picture: 123RF/ALLAN SWART

SA life insurers paid out almost 100% of all death claims for fully underwritten individual life policies in 2018, official statistics show.

The Association for Savings and Investment SA (Asisa) said in a statement that the value of the 33,545 claims paid out against fully underwritten individual life policies amounted to a record R15.1bn. This is more than double the R6.8bn paid out since Asisa started consolidating statistics in 2012, Rosemary Lightbody, senior policy adviser at Asisa, says.

Life insurers declined 0.7% or 222 claims against underwritten individual life policies in 2018.

Lightbody says although nondisclosure of material information made up more than half of the claims rejected by life insurers, it is encouraging that it has decreased significantly from 70.3% in 2012 to 55.4% in 2018.

Nondisclosure, which refers to policyholders not disclosing material information about a medical or lifestyle condition to secure lower premiums or to obtain cover without exclusions, came into the spotlight in 2018 when Momentum rejected a claim on the life of hijack-victim Nathan Ganas. He had apparently been diagnosed with raised blood sugar levels, which may have occurred before he completed his application for the policy in 2014.

Lightbody says it is critically important for you to understand the potentially devastating financial impact it can have on your family if you are not honest when disclosing important information such as any lifestyle or health-related detail that could materially affect the terms of the policy.

"If you are not sure whether information could be considered as material by the life insurer, rather disclose it," she says.

Claims rejected due to fraud increased to 16.2% from 7.6% in 2017. Lightbody says it is not uncommon for fraud to increase in a difficult economic environment as people get more desperate to access cash.

Asisa says insurers will always pay death claims against fully underwritten life policies, provided the claim is not fraudulent and the policyholder did not commit suicide within the first two years of taking out the policy; withhold important information when applying for the policy; or die as a result of an exclusion.

Exclusions applied by life companies are usually for risky part-time activities or territorial exclusions where people spend some time working in other countries under dangerous conditions. This means that if the policyholder is killed as a result of the excluded activity or in the excluded territory, the life policy will not pay a benefit, Lightbody explains.

She says incidents of claims declined due to suicide dropped from 65 cases in 2017 to 45 in 2018.

Fully underwritten life policies are only issued if the individual policyholder has completed a full underwriting process, which involves a comprehensive assessment of the life insured’s health and medical history.