Beneficiaries, bullets and R17 billion in unpaid claims

When Durban widow Denise Ganas was denied an insurance payout and asked to repay a R50 000 cash benefit in 2017, after her husband was shot in a hijacking attempt, most of South Africa was up in arms - perhaps with the exception of a few hardened industry experts who had seen this type of thing before.

"Can life insurers ethically refuse to help a client in dire need, whether or not the client is legally entitled?" was the question asked by such high-profile tweeters as Thuli Mandosela, supported by thousands of others.

The questions that circulated included these: "Is this life insurance thing just a scam: with so many Ts&Cs, how do you know if you're really covered until it's too late?" and "Do morality and ethics now trump the law?" and "How is it possible that these do not always align?"

Insurers in SA know that the problems stem from far more than this case. Insurance has for years been viewed as a grudge purchase and is frequently near the bottom of the consumer trust index - 2019 again saw financial services as the 'least trusted sector' globally for the respected Edelman Trust Barometer.

"It's time for transparency, authenticity and honesty," says MiWayLife CEO Craig Baker. "The truth is that many more claims are being paid out than most people are aware of, and a staggering number of legitimate claims are waiting to be paid out but haven't been, due to the policyholder. People either don't know this or simply don't care. It's hard to believe, considering so many people's livelihoods and even lives are involved. It's time to break the silence."

According to the 2018 figures from the Association for Savings and Investment South Africa (Asisa), life insurers paid back more than R67 billion in claims during 2018 (2019 figures are not yet available). This amounts to 99.3% of all claims received. In fact, MiWayLife parent company Sanlam paid out nearly R4 billion in claims last year.

However, a staggering sum of R17 billion in approved claims is waiting to be paid out by the industry and hasn't been due to policyholders, not insurers. "Life insurers actually have a very real and pressing motive for paying out as many legitimate claims as possible," says Baker. "Not only do the insurers have to keep these funds available, but they also incur the cost of trying to trace beneficiaries and managing the assets."

MiWayLife currently has approximately 55 000 lives on cover, at an average coverage amount of nearly R1 000 000. This adds up to approximately R55 billion in cover that is protecting the lives of South Africans. "We have that money on the line for every policyholder; we assume that every policy will be a claim. That is why we are in business," says Baker.

"What Ganas proved was that there is a need to re-assess the way that people interact with insurers, and vice versa. There is mounting evidence that the Ganas case did create greater awareness, with many people coming forward to check their cover based on their previous disclosures.

"It also highlighted the power of public opinion and that the traditional claim methodologies require some re-thinking. Everyone wins if the public knows more about their insurance. But the problem is that because of the massive fallout from these events, the fear of getting embroiled in yet another social media storm leads the insurance industry not to talk about it enough, rather than to talk about it more with the aim of educating everyone. We would like to see that change," says Baker.

While the facts of the Ganas case in its entirety are probably only known to a limited number of people, the initial reason for the Ganas repudiation was the non-disclosure of a medical condition(s). This was, to the public, immediately odd: someone had died at the hands of a hijacker, and what on earth did that have to do with their medical condition?

Insurance is all about risk and protecting against the risk of uncertain events (so even though death is ultimately certain, the timing and method thereof should not be known in order for it to be insurable), and non-disclosure is taken very seriously.

Deliberately keeping or manipulating key facts from insurers is known as misrepresentation, while non-disclosure is simply not having told the insurer the whole truth generally, by accident. Based on this, one can dream up myriad circumstances that would have made the repudiation in this case either more or less acceptable. How would people have felt if the person had died directly as a result of the condition that was not disclosed or a related health or medical condition, or even an accident that was not a result of violent crime?

"This shows that disclosing every potential health risk is vital," says Baker. "These include existing or known medical conditions, any chronic condition requiring medication, lifestyle choices like whether or not you smoke, and even, in some cases, whether you change careers - some would argue that being a game ranger is more or less risky than an accountant.

"Many people leave things out on purpose, thinking that the disclosure will cost them more in higher premiums every month. What they don't realise is that this could land up costing their family thousands. So while the industry (and there are specialists that are looking at this case to see how similar cases get addressed going forward), the regulators and the public wrestle with these uncomfortable situations, the advice is to disclose everything that you know when dealing with your insurer."

According to Baker, "a certified financial planner or qualified sales agent will know all the terms and conditions, all the potential exclusions and they will ask you questions for things you may not have thought of mentioning, like diet and exercise questions. But in general, the best approach is to over-share rather than under-share. Anything that could affect your health, from smoking to healthy eating to conditions or hereditary risks in your family, your life insurer should know about all of it."

Baker's last piece of advice? "Don't forget to pay your premiums every month. Your coverage from the insurer is the product you get for the price of your premium, so if you haven't paid your premium, assume that you don't have cover. If you are on a policy that accumulates rewards, benefits or a savings pool and you skip a monthly payment, that could put you back to square one with those. Many people don't understand that."

"MiWayLife is an authorised FSP (No. 45741) and its product offering is underwritten by Sanlam Life Insurance Limited, a registered long-term insurer."