Discovery Employee Benefits sees increasing uncertainty in insurance claims

Discovery Employee Benefits sees increasing uncertainty in insurance claims

R1.94 billion in total paid out to death and disability claims during 2023 financial year

As the world starts putting COVID-19’s high mortality claims behind it, the insurance industry is battling a wave of uncertainty. While Discovery Employee Benefits paid a total of R1.94 billion in death and disability claims through its Group Risk benefits between 1 July 2022 and 30 June 2023, the group affirms that it’s been very complicated to predict claims during the period. In particular, there’s been an unpredictable shift in conditions currently driving death and disability.

Discovery Employee Benefits insures more than half a million individuals through Group Risk benefits, working at approximately 2,500 employer groups countrywide. The annual Group Risk claims data for the 2023 year, for the 12 months ending on 30 June 2023, shows that total deaths (from both natural and unnatural causes) have increased slightly compared to pre-pandemic levels.

Natural deaths have decreased slightly, but General Manager and Head of Product at Discovery Employee Benefits, Guy Chennells, is concerned that this decline could be short-lived – the causes of death driving the decline may merely be the effects of temporary ‘mortality acceleration’, but there are other causes of death that are increasing because of long-term effects of both Covid and as a result of individuals not conducting preventative screenings and annual health checks.

Mortality acceleration is a term used to describe when the number of deaths accelerates ‘ahead of schedule’ and ahead of a normal expect death rate. In other words, some members whose health was already compromised (and would have been more likely to die in the following year or two due to their existing frailties or co-morbidities) died from Covid.

“There are so many things happening. Certain conditions that were causing an increase in natural deaths are down over the past 12 months, while others are increasing. It’s interesting to show what’s happening but it’s hard to predict what will happen in the coming years, given all these effects,” says Chennells.

The claims data shows that the increase in total deaths from pre-pandemic levels is driven by a rise in unnatural deaths.

The claims trends for July 2022 to end June 2023 differ by cause of claim and also by different age, gender or income groups within each cause of claim, making the ultimate trend trajectory looking ahead very hard to predict. Chennells says that the insights emerging in 2023 show that there has been an increase in disability claims, with significant differences in the trends of diseases driving disability claims compared to pre-pandemic levels three years ago.

Natural deaths

Overall, natural deaths declined during the 2023 year. The top four leading causes of claims for deaths by natural causes during the 2023 year in review were: respiratory diseases (24%), cardiovascular complications (23%), cancer (19%), and multi-organ failure (14%).

As mentioned previously the decline in natural deaths can partly be explained by a ‘mortality acceleration’ effect during the COVID pandemic. And, while cardiovascular complications are one of the top causes of natural death claims over the past year, the data reveals a 16% decline in cardiovascular-related deaths compared to the 2020 financial year. There has also been a 40% decline in renal disease-related claims during the same period (both cardiovascular and renal-related conditions were associated with highly elevated risk of death after a Covid infection). These declines are however expected to be short-term.

Cancer-related deaths – also one of the leading causes of natural deaths in the 2023 year - have worryingly increased, in particular for members over the age of 50, while there is also a rapid increase in diabetes-related and multiple organ failure-related deaths.

“With different causes of natural death moving in different directions, and for different reasons, it is especially hard this year to predict what next year might hold,” notes Chennells. “On the one hand, while there is no reason to think that the underlying behaviours or disease prevalence for these conditions has changed in any way for the better or for worse, we have seen a decline in the number of mortalities from cardiovascular and renal disease over the past year. If this is mortality acceleration related, then we should expect those causes to return to normal levels in the near term. On the other hand, we note that cancer, multi-organ failure and endocrine-related deaths continue to remain at levels that are way above pre-Covid levels. These may be true trends related to increasing underlying condition prevalence trends.”

Breaking the data down for each condition is as follows:

• Endocrine and metabolic diseases-related deaths for the 2023 financial year are 116% higher compared to pre-Covid levels.
• Multi-organ failure deaths are 20% above pre-Covid levels.
• Cancer-related death claims remain at 36% above the claims recorded during pre-Covid years. Members above the age of 50 still experienced excess deaths from cancer and their claims stayed 44% higher than the deaths recorded in 2020.
• Deaths caused by respiratory diseases were also 47% above the levels recorded pre-pandemic for those aged 50 years or older.

Unnatural deaths

Unnatural deaths are 20% above the levels which were recorded for unnatural deaths during the 2020 financial year. Chennells notes that this is a persistent trend since the start of COVID-19.

Suicide-related deaths have increased by 54% compared to pre-Covid levels, with the biggest increases coming from members who are under the age of 40.

“We have noted that suicide statistics in the under 30s age group have skyrocketed, but there was also a significant increase in the 30 to 40-year-old age group. It could be because people in the middle-age bands are the ones facing the most economic pressure with the rising interest rates and inflation putting pressure on their bond repayments, other debt, and family financial commitments,” adds Chennells.

Unnatural deaths caused by crime had increased sharply during Covid, with a seeming correlation to rising unemployment, but we note that although still higher than before Covid, crime related death rates are 30% down from the COVID-19 period peak as employment rates have improved slightly from the record-high unemployment rates recorded in 2021.

Disability claims

Claims data from Discovery Employee Benefits shows that elevated disability levels have persisted since 2020. Of the R1.94 billion the company paid out in total claims for the 12 months to 30 June 2023, 38% were for disability claims, with 74% of those coming from the Income Continuation Benefit (ICB). ICB claims are now 10% higher than pre-pandemic levels.

Chennells says the disability rates increased more drastically in 2023, with conditions like cancer, nervous system, respiratory as well as mental and behavioural disorders remaining stubbornly above pre-pandemic levels.

Chennells attributes the nervous system and respiratory trend in a large part to the long-term after-effects of COVID-19 as the virus has been proven to damage lungs and other respiratory organs, and to increase the risk of developing blood clotting disorders that can lead to cardiovascular or nervous system related conditions.

“When it comes to mental and behaviourial disorders, we’ve seen a 79% increase in disability claims from young families (30- 40 age band) since the year to June 2020,” he adds. “Middle income earners have also seen a dramatic rise, likely linked to difficult economic conditions that COVID and the time post-COVID have caused.”

Females seem to be taking the most strain, with their disability claims increasing by 13% relative to pre-Covid levels, while disability claims from males have decreased by 10% compared to pre-Covid levels and male disability claims were down 28% from 2022,” says Chennells.

With these being only the highlights of the findings, it is clear to see why predicting and pricing for expected claims is more complex and challenging than ever before.

“We have always taken a responsible and informed approach to pricing for risk,” says Chennells. “We anticipated that many of these claim trend drivers would be with us post-Covid when we were still in the pandemic. Now the challenge is to try and get the expected levels of claims right so that pricing remains sustainable going forward.”

Working hard to understand claim drivers is critical to Discovery’s claims insights processes because it helps to target and address poor health causes and outcomes among those they insure.

“We are not just risk takers, but also risk influencers. That’s how we unlock Shared Value for our customers, and that has never been more relevant than now,” concludes Chennells.