While the impact of the pandemic may vary from country to country, the COVID-19 crisis affects all societies and economies as it slowed down trade and day-to-day business operations. Sanlam Corporate: Group Risk (hereafter referred to as SGR) noted the concerns among our clients, their employees/members and their advisors in respect of the COVID-19 virus and SGR’s current operational processes relating to policy conditions. To read about our business continuity measures, click here.
We have also received numerous requests to consider various mechanisms to alleviate the financial burden of premium payments on employers and employees during this time, especially whether risk cover can be reduced or terminated in the short term as a result of their financial constraints.
SGR empathizes with the financial challenges posed by the lockdown and believes that appropriate risk cover is particularly relevant in this time and have explored practical options to try to accommodate clients’ needs during this time.
Please note however that it is important to consider the potential implications if such cover is reduced or terminated as there may be dire consequences in a period where potential claimants can least afford disruption. In addition, all of the options have labour law implications, and we would accordingly recommend that you obtain legal advice before deciding to follow one of the below options:
- Continue paying full risk premiums in terms of the group risk policy while reducing retirement fund contributions thereby maintaining full benefit coverage during these uncertain times
Employers under financial difficulty may consider this route, which is to maintain full risk benefit coverage in terms of the group risk policy and reduce retirement fund contributions until the crisis subsides. It is important to note that this can only be done if allowed in terms of the rules of the fund. Please engage with your consultant to explore whether your specific fund rules allows for such a mechanism and how to proceed.
- Reduce all employees’ risk salaries for a limited period thereby reducing premiums and benefit coverage in terms of the group risk policy accordingly
Employers may consider temporarily reducing employees’ risk salaries and thereby reducing risk benefit coverage and premiums accordingly. It is crucial to be aware that risk benefit coverage will be reduced relative to the risk salary reduction, i.e. unless specified differently in your policy, it will not be determined as the average of the last 12 months salary, since cover is calculated based on the most recent risk salary and premium received.
In cases where risk salaries are reduced to zero for a specified period, the coverage benefits and risk premiums would similarly be reduced to zero for that period.
This method allows for employees to remain covered (even if for no benefit) thereby avoiding break in cover limitations and enables SGR to reinstate full benefit coverage once the employer wishes to return to normal with minimal disruption. The period to allow for full reinstatement will be limited and dependent on the risk profile of the employer.
- Terminate coverage and reapply for new benefit coverage as and when the situation normalizes
This route has the consequence that employees would not be covered in terms of the group risk policy during this high risk period, especially where such cover may be required to provide financial support or peace of mind for many families. The reintroduction of cover may result in the need for new quotations, new policy contracts and possibly new pre-existing health conditions amongst other requirements in the future. Our view is that this option is the least preferred and we would strongly caution against such a route.
We also anticipate that communicating any reduction or termination in cover to employees under the current circumstances may be problematic, and is likely to result in severe misunderstandings and a negative reaction from the employees and their dependants.
Should an employer take the decision to reduce or terminate risk benefits in terms of its group risk policy, then the employer could be exposed to this liability if claims arise. Employers should carefully consider the content of their employees’ employment contracts and obtain legal and financial advice in this regard. SGR would not be liable for any benefit for which the requisite premiums have not been received.
It is critically important to stress that any decisions should only be taken after careful consideration of the implications of reducing or terminating group risk cover and that obtaining legal and financial advice is strongly recommended under such circumstances. Any changes made to employees’ benefits or premiums should also be communicated in terms of the Policyholder Protection Rules to affected employees.
Please do not hesitate to contact your Client Solutions Specialist, EB BlueStar Consultant or Client Relationship Manager should you wish to explore any of these options.