Insurance Claims and Time
Time is powerful. It’s one of the few things in the world that is totally unstoppable. We can build dams to stop water, we can build barriers to stop rock falls, but we can’t stop that march of time. As time affects people and things, it follows that insurance companies need to get a good handle on time in order to understand their claims experience.
Time can affect life insurance in various different mechanisms. As people get older, their probability of dying or becoming disabled increases – but conversely, as technology advances, diagnosis and treatment of diseases improves, which leads to mortality and morbidity improvements over time. These are complicated issues for the actuaries to figure out, but we’ve dug through our book of claims to find some easy to understand and interesting trends around time.
Insurance companies often talk about “winter claims” when they report on their experience. What they generally mean by this is that we expect more claims in the winter months than in the summer months. Now, this trend doesn’t hold true every year – over the last 10 years, 2 years saw higher summer claims than winter – however, long term there definitely seems to be some effect. On average, over the last 20 years, winter claims have exceeded summer claims by over 6%. When you’re talking billions of rands of claims, this is a large amount of claims! In some particularly bad years, winter claims were as high as 20% higher than summer claims.
This effect is seen world-wide, however, geographical location has a huge impact on the size of the effect. This is intuitively obvious, as the colder a country’s winter months are, the higher mortality will be in those months as people are affected worse by flu or other respiratory diseases.
As part of research done in 2017, RGA (Reinsurance Group of America), has included a graph to show this effect in different parts of the world. Comparing these to our numbers, you can see that our effect is much lower due to our milder winters.
Similarly, seasons also have a marked effect on disability claims.
In terms of non-natural causes, motorcycle accidents increase by over 30% in the winter months. Those in the Western Cape will blame the wet weather, but most of the country has a dry winter so this increase in incidence is likely to be because of less sunlight causing people to drive in the dark more often.
In the winter months we also see more than 25% claims for respiratory diseases – but only for Income Disability insurance. Lump Sum Disability insurance sees an almost insignificant increase in respiratory claims in winter. This is likely to indicate the shorter term nature of these seasonal afflictions, e.g. very bad flu, bronchitis, pneumonia. As these are less likely to produce permanent disability, they don’t qualify for Lump Sum Disability insurance claims.
Many people feel the “winter blues” – so much so that doctors have given the condition a name: Seasonal Affective Disorder (or SAD!). Now, our winters are not as bad as some northern hemisphere countries, but South Africans still definitely feel the pinch in winter. Depression claims increase in winter by over 20% for Income Disability insurance and 10% for Lump Sum Disability insurance.
It’s not only the seasons that have an effect on claims. Even the day of the week can have a big effect on certain claims. Non-natural mortality claims increase by over 70% on weekends (Friday, Saturday and Sunday). This is predominantly due to a huge increase in motor-vehicle accidents and assaults, which gives us a little insight into the exploits of people over the weekends.
Interestingly, Saturdays and Sundays consistently show around 5% fewer deaths due to strokes and heart attacks than the rest of the week. While not enormously significant, it might give some comfort to those of you out there to know that you’re not the only person suffering from enormous stress in the work place!
So the next time you see someone suffering from a really bad cold due to the weather, the winter blues or even just a bad Monday at work, be happy it’s not you and feel sympathy for them, because time affects us all in a very real way!
Warm regards
Neil Cilliers