Craigh Chidrawi ‘s View | Impact of death claims in 2020
In the last year, the retirement funds that NMG provides consulting and administration services to have seen a marked increase in the number of death claims being received. The insurers that NMG deals with have given feedback that they are receiving significantly more death claims than expected. The value of the death claims is also higher than was experienced previously as individuals with higher salaries (and therefore higher levels of cover) pass away.
The insurers believe that not every Covid-19 related death is reported as a Covid-19 death. Individuals may have passed away without being tested or before being tested. ?Also, in the last year, patients have been reluctant to go to the doctor or hospital. They have not been keeping up with their regular screening and there have been times when there has been a lack of capacity in hospitals.?
Effect of increased death claims
At annual renewal, insurers are typically increasing premium rates by around 30 – 40% because of the increased claims experience on their overall book of business.
In the past, doing a market testing exercise was a regular occurrence to ensure that the best deal was in place. When the market is pricing similarly though, the more important concern needs to be about the most appropriate benefit design for the individuals. Engagement may be needed to better understand member’s needs.
One approach may be to give members a choice of the level of death benefit cover to be insured. This would assist members having a more appropriate level of cover and avoiding a one-size-fits-all approach. Members can then balance the allocation of their contribution to insurance and retirement savings.
Keeping the dependents and nominees form updated
It can take some time for the trustees of a retirement fund to decide on the payment of the death benefit. It’s much easier for the trustees and the employer to find out who the dependents and nominees are, if members keep their dependents and nominees form up to date. This can shorten the time it takes to pay a death benefit.
Retirement fund members should be encouraged to complete the fund’s dependents and nominees form regularly and especially if life changes take place. For example, if a member gets married, divorced, or has a child, they should be asked to update the form.
Employer’s death benefit insurance cover
The death benefit is sometimes insured by the employer outside of the retirement fund. In this case, the insurance benefit is not paid to the retirement fund when an employee passes away.
Previously, the law allowed the employer the discretion on how to distribute this type of death benefit, provided the policy allowed for this. Recent changes to insurance laws require that the benefit be paid directly to the people nominated to receive the benefit. If there is no form on record, the death benefit must be paid to the estate.
If you have this type of insurance cover for your employees, it is critical that all employees covered by the policy complete the insurer’s own nomination form.
The information in this communication is for information purposes and is not intended to be detailed advice described in the Financial Advisory and Intermediary Services Act. The fund, administrator and trustees cannot be held liable for damage or loss suffered as a result of any action that you take based on the contents of this communication.