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A recent study by the Association for Savings and Investments South Africa (ASISA) holds an important lessons for all South Africans looking to invest in life insurance: be honest with your life insurance company when applying for cover.
The ASISA research evaluated the rate at which life insurance claims* were rejected or declined by 12 long-term insurance companies in 2012. Of the 34 724 claims submitted, only 352 were declined, or in other words 99% of all claims were paid out. While this is good news for policyholders it is important to take a closer look at the reasons why claims were rejected.
According to the study claims were rejected for the following reasons:
Non-disclosure (70.34%)
According to ASISA non-disclosure is the ‘deliberate failure of policyholders to disclose information about a medical or lifestyle condition, which is material to the assessment of the risk to be insured’. An example of non-disclosure would be if an applicant were not completely honest about an existing medical condition or his/her family’s medical history.
Suicide (20%)
South African life insurance companies impose a two-year waiting period for suicide on all life insurance claims. In this case claims were declined if the insured committed suicide within the waiting period.
Underwriting exclusions (6.13%)
This refers to claims being rejected because the policyholder died as a result of a condition that is excluded by the policy.
Fraud (3.42%)
Just over 3% of all claims were declined as a result of claims fraud, for example identity theft.
How to ensure your claims are honoured
Don’t run the risk of a rejected life cover claim. Here is how you can ensure that your policy is not declined:
- Never withhold information from your provider. Answer all questions about your lifestyle, your health and your family’s medical history honestly and in as much detail as possible
- Check all of your application forms and policy documents carefully. Ensure that all the information you provided was recorded correctly in your policy documents.
While withholding information from your provider might mean that your premiums are cheaper you will run the risk of a rejected claim. Be honest with your provider and secure your family’s financial future.
* - only fully underwritten life insurance policies were evaluated
Frequently asked questions
Out of 34,724 claims submitted, only 352 were declined, which means approximately 99% of all claims were paid out.
The study found that the main reasons for claim rejection were:
- Non-disclosure (70.34%): This occurs when policyholders deliberately fail to disclose relevant information about their medical or lifestyle conditions that could affect the assessment of the risk to be insured.
- Suicide (20%): Claims were declined if the insured committed suicide within the two-year waiting period imposed by South African life insurance companies.
- Underwriting exclusions (6.13%): Claims were rejected when the policyholder died as a result of a condition that is excluded by the policy.
- Fraud (3.42%): Some claims were declined due to claims fraud, such as identity theft.
Non-disclosure refers to the deliberate failure of policyholders to disclose information about a medical or lifestyle condition that is material to the assessment of the risk to be insured. For example, if an applicant is not completely honest about an existing medical condition or their family's medical history.
To ensure that your life insurance claims are honoured, follow these steps:
- Never withhold information from your provider. Answer all questions about your lifestyle, health, and family's medical history honestly and in detail.
- Check all application forms and policy documents carefully to ensure that the information you provided is recorded correctly.
- Avoid the temptation of withholding information to get cheaper premiums, as this could increase the risk of a rejected claim. Be honest with your provider to secure your family's financial future.
No, the ASISA study only evaluated fully underwritten life insurance policies.
South African life insurance companies impose a two-year waiting period for suicide claims. If the insured commits suicide within this waiting period, the claim may be declined.
