It has been just over a year since the start of the COVID-19 pandemic, which has had a financial and emotional impact on many employers and their employees. We had hoped that by the end of 2020, the worst would be over, with the global rollout of vaccines on the horizon. We had no idea the virus would mutate quickly, causing a worse-than-expected second wave in South Africa.
Following the initial shock of the first wave, South Africa experienced a second wave from late November to early February. According to the South African Medical Research Council’s weekly death statistics, many more people died in the second wave than in the first, with an immersive death peak in January 2021. This was due to increased socialisation during the holiday season, and the local introduction of a virulent new strain.
A rise in infections in some parts of South Africa indicates that a third wave of infections and deaths is underway and we must further prepare for a possible fourth wave. The Sanlam Umbrella Fund’s insured benefits service providers anticipate an increase in death and funeral claims on their books as the winter season approaches.
Sanlam Group Risk reported that South Africa recorded about 35% more deaths in the period 3 May 2021 to 13 May 2021 than would typically have been recorded over the same period. These deaths have severely affected the insurance industry, with significant increases in claims reported by all major insurers over this time frame.
At the beginning of 2021, the Sanlam Umbrella Fund announced a six months postponement of risk rates revision for employers with under 400 members in the hope of not implementing increases in 2021. The high claim rates of the Fund’s insurance service providers are now reaching a point where increases in group risk premium rates are inevitable.
The uncertainty surrounding the Covid-19 illness’s impact on people’s futures is also expected to have a negative impact on mortality rates over time. We believe that, in addition to the immediate impact of Covid-19 mortality rates, there may be secondary effects on disability and critical illness risks, as well as potential long-term mortality effects.
The continuing spread of Covid-19, together with a bad economy, may negatively impact future disability claims experience. We believe it is still too early to determine the full extent of the impact, but we will continue to monitor claims experience for any indications of this.
We recognise that an increase in premiums will put additional financial strain on clients and members. However, this may also present an excellent opportunity to reassess your risk benefit needs and realign them to ensure that they continue to meet members’ needs.
In line with our commitment to adequately communicate any possible increases in risk rates with our stakeholders, Yolanda Cezula, Executive Consultant at Sanlam Umbrella Solutions, discussed the impact of COVID-19 on Sanlam Umbrella Fund’s group insurance pricing in a video to participating employers and intermediaries distributed on 13 May 2021.
The Sanlam Umbrella Fund will ensure that any change in risk rates is adequately communicated ahead of time.