Are you feeling a little bitter about paying life insurance premiums month-on-month, knowing very well you will never see any of those premiums back? It feels like a tough pill to swallow, doesn’t it? You don’t really want to cancel your life policy because you can’t run the risk of leaving your family with nothing if your number is suddenly up, but there is also that nagging sense that the money could be spent on a million other financial commitments, that are continually stacking up in your life.
Welcome to the “trying to beat the recession club”.
But you know what makes me feel better about paying my life insurance premiums every month? Rock solid claims statistics!
In our previous Old Mutual blog post, we looked at the GREENLIGHT life cover offering from Old Mutual. If you haven’t checked it out, make sure you read it after you are finished here. In this blog post, we are going to run through some of claims stats provided by Old Mutual, in a recent report.
GREENLIGHT 2016 CLAIMS STATS SUMMARY
Here are the overall amounts paid out per benefit category under the GREENLIGHT policy.
• Death cover: R3.08 billion
• Disability cover: R372 million
• Severe Illness & Physical Impairment cover: R566 million
• Retrenchment cover: R9 million
Did you know Old Mutual pays R16 million in total risk claims every day? That’s a pretty interesting statistic.
But here is a stat which is the key to this particular blog post:
Old Mutual’s overall (including life, disability and severe illness) payout ratio was 96% in 2016
What is a payout ratio? Good question. Let’s start with that:
Old Mutual calculates claim payout ratios based on valid claims received. They excluded invalid claims; these are claims that were submitted under an incorrect benefit (i.e. a disability claim for a fractured arm, under a death benefit), or where the benefit was paid up or cancelled before the claim event occurred.
If you are sitting with an Old Mutual GREENLIGHT policy it’s nice to know that 96% of valid claims are paid. Imagine you had that information at policy sign-up stage? Would you even flinch at signing off on the cover and the premium collection? Probably not.
Why didn’t they payout the other 4%?
Here is the detail:
• Benefit definition not met 53%
• Non-disclosure 17%
• General exclusion 17%
• Suicide exclusion 7%
• Underwriting exclusion 5%
• Fraud 1%
It’s pretty easy to see that the majority of the declined claims simply didn’t meet the benefits definition. And all that means is that the claim was submitted under an incorrect section of the policy.
Can we learn anything from that?
The take away is that you should take the time to understand your policy benefits (and that is all covered in the policy wording).
Make 100% sure that you disclose all requested information, correctly, at the time of application!
One final question before we end off: How was your life insurers payout ratio in 2016? Do you know?
In our next Old Mutual blog post we will take a closer look at more of the statistics in this report.
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