Recent events have reminded me that life is like a rollercoaster ride filled with positive and negative experiences.  The negative experiences included the Steinhoff collapse, a listeriosis outbreak, an increase in the VAT rate, and unfortunately even the death of family friends.  The positive experiences have included my discovery of “curling” as a sport at the winter Olympics (just joking), the Mugabe coup d’état, Cape Town avoiding #Dayzero, and the appointment of a new South African president – one that we can all feel very proud of.

In this environment of uncertainty, the most that we can try to do is prevent, or if not possible to prevent, to prepare ourselves and our families for any possible negative experiences that could unfold.  The recent drought has seen some of us Cape Town residents investing in boreholes or water tanks to prevent #Dayzero (if there is no rainy day), and the recent deaths of family friends has served as a personal reminder of the importance of taking time to do financial planning for that philosophical “rainy day”.

The South African insurance industry has experienced quite an increase in philosophical rainy days lately, as the 2017 results reflect yet another year with high mortality and morbidity claims.  As an indication, Group Risk, a business unit of Sanlam Employee Benefits (hereafter referred to as Sanlam Group Risk), and which insures approximately 18% of the group business in South Africa, paid over 10 700 death benefits to beneficiaries, 1 820 disability claims and 260 trauma claims.

There is a lot of speculation as to why we are seeing an increase in mortality and morbidity experience, including theories about stressful lifestyles, increased use of technology, unhealthy convenience foods amongst many others, and when linked to the types of claims insurers are seeing such as cardiovascular (heart attacks and strokes) and cancer, there is probably some justification for such theories.

For years insurers have had statistical evidence supporting that the state of the economy is a key driver of disability claims experience (Karl Shriek developed a model for predicting disability claims based on various economic indicators), however it is only recently that Sanlam was involved in a research project at a large South African organization, where statistical evidence was found to show that there is also a strong correlation between financial stress and mortality experience.

To some extent the poor state of the economy is to blame for the over-indebtedness of some South Africans, however it is time that more individuals start to take personal responsibility for their own financial planning, especially living within ones means, to ensure that there are adequate savings and or insurance benefits for families to rely on when needed.

Similarly, South Africans must take personal responsibility for following proper diets and achieving decent levels of activity to improve their health and thereby their mortality and morbidity experiences.  Although we are seeing an increase in the number of employers offering wellness programs to their employees, success is only achieved when there is a willingness by the individuals to take ownership for their own health.

There is currently an increased and renewed awareness amongst businesses and insurers that an appropriate focus on physical and financial health, should result in improved results for companies (decreased absenteeism and increased productivity), and improved financial and medical benefits for members through reduced medical expenses and reduced death and disability insurance claims.

It is however extremely unfortunate that despite physical and financial health, premature death or disability are sometimes unavoidable, which is why insurance forms such a necessary part of an individual’s financial planning.

For many people in South Africa, their only form of financial planning is in the form of their company retirement fund, and group insurance benefits.  Without group insurance cover, many of the 13 thousand beneficiaries who received a benefit from Sanlam Group Risk in 2017 would have received nothing and would have found themselves in an even more dire situation than losing a loved one or an income.

Financial planning also means ensuring that beneficiary nomination forms are always up to date so that for approved* benefits the trustees can speed up the process for the retirement fund risk benefits to be allocated to the dependents (known as the Section 37C process – as per the Pension Funds Act) and for the unapproved* benefits the insurance proceeds can be paid quickly to the correct nominated beneficiaries.

Insurers still see too many instances where there are no nomination forms, resulting in a prolonged Section 37C process, or proceeds being paid to the estate (unapproved insurance).  We also often see cases where the beneficiaries listed for the unapproved insurance are outdated and unintentionally include an ex-spouse or an incomplete list of children/ dependents, resulting in the benefits being paid to the unintended beneficiaries.

As members it is important to make use of the benefits that are offered to us by our employers.  By taking personal responsibility for our financial health we can fill the gaps through adding personal savings and insurances, and ensure that we update our beneficiary nomination forms on a regular basis.  Our physical health is also in our own hands, and if we make a decision to take personal responsibility of our physical health, healthy diets and active lifestyles become the norm.

As Hal Elrod said, “The moment you take responsibility for everything in your life is the moment you can change anything in your life”.

*Group Insurance is offered by employers as either approved benefits (where the retirement fund is the policyholder) or as unapproved benefits where the employer is the policyholder.

Warm regards,