Life insurer Bidvest Life says that speed makes all the difference when it comes to paying claims. This is particularly important for income protection which is purchased to replace lost earnings when the life insured is unable to work. In 2022, the average time from lodging an income protection claim until the first payment was 16.5 business days, and 50% of claims were paid within 10 business days. The fastest payout was 2.25 hours for a Covid-19 claim.

Presenting the 2022 Claims Report to its supporting financial advisers, Nic Smit, Bidvest Life Chief Product and Pricing Actuary, said that while Bidvest Life paid out 89% of all the income protection claims lodged in 2022, the leading cause of non-payment was that clients tried to claim while still within their waiting period (the waiting period is the number of days a policyholder must be sick or unable to work before an income protection claim will start paying). For financial advisers, it’s essential to educate clients and ensure they select the right waiting period for their needs.

“According to Bidvest Life’s 2022 Claims Report, 54% of income protection claims lasted less than 30 days. This means that choosing a 30-day waiting period instead of a 7-day waiting period would cover you for less than half of the claim events covered by the 7-day waiting period. Given that income protection is usually sold on either a 7- or 30-day waiting period, the choice between these two waiting periods is an important decision. Bidvest Life allows a wider range of self-employed lives to take cover on the 7-day waiting period and has also introduced a 14-day waiting period to give salaried lives a shorter waiting period than the 30-day waiting period that is typically made available to them,” said Smit

Minor infections were the leading cause of income protection claims, while mental illness was the third-most common reason for claiming. Many policyholders may not know that they can claim for these types of events. These results simply reiterate the critical role that financial advisers play in ensuring their clients choose the right life insurance to protect them and their loved ones from life’s setbacks.

Income protection claims accounted for 58% of Bidvest Life’s payouts in 2022 – more than for the rest of its portfolio combined. 21.4% of claims paid were for Life Lump Sum, while Critical Illness Lump Sum was responsible for 9.2% of claims, Disability Lump Sum for 4.9%, and Life Income for 3.5%.

In 2022, Bidvest Life saw over 200x more income protection claims lodged than disability lump sum claims – showing that most injuries and illnesses may impact your ability to work temporarily but won’t necessarily result in a claim on lump sum disability cover, which requires permanence. This presents an opportunity for insurers and advisers to change the way that life insurance is perceived and sold, ensuring that clients protect themselves against their most likely risks.

What’s more, Bidvest Life’s critical illness benefit boosted 4% of its 2022 income protection claims, but they represented 22% of the total amount paid for income protection claims in the year, which indicates that critical illness claims are far more severe than ‘average’ claims. 64% of critical illness lump sum payments were for cancer – a trend Bidvest Life has noted over the preceding years, and has led to continued improvement in the quality and breadth of its cancer cover.

Smit also noted that 1 of 5 critical illness lump sum claims paid out in 2022 were for conditions suffered by the children of the life insured; a significant finding given that policyholders generally take out critical illness cover for themselves only.

According to Bidvest Life’s 2022 Claims Report, nearly one quarter of death claims were paid as an income rather than the traditional lump sum favoured by the market. Combining income and lump sum benefits that pay out on death provides a more balanced and cost-effective solution, aligning with client preferences and offering greater flexibility.

“During 2022 we saw that income protection drives the majority of our claim payments and this demonstrates that our approach, which is different from industry norms, is effectively safeguarding our clients’ incomes against temporary setbacks. However, we remain a fully-fledged life insurer and continue to grow beyond income protection, making ongoing enhancements to our portfolio of products, and catering for a broader spectrum of life insurance benefits,” said Smit.