Absa Life predicts less deadly fifth wave of Covid-19 | Fin24

Absa Life CEO, Eugene Straussn says the insurer has been burying itself in scientifically peer-reviewed research to predict the waves and plan its response.
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  • Absa’s life insurance business says it reads a lot of scientific peer-reviewed research to predict Covid-19 waves.
  • This also helps it plan better regarding the level of provisions it needs for possible claims.
  • The insurer expects a less deadly fifth wave, possibly even milder than the fourth wave in terms of deaths.

Absa Life, the first bank insurer to predict that the fifth wave of Covid-19 infections might be around the corner, says it nonetheless expects the trend of milder illness to continue.

The insurer set aside R423 million Covid-19 provision for the fourth and fifth wave at the end of 2021, but only one-third of that is for the coming wave. 

Absa Life CEO, Eugene Strauss and his team, predict that it will likely be less severe than any other waves SA has passed. 

“Actually, the experience has been very, very positive,” he said, referring to the fourth wave claims.

He said excess deaths are not as high as they used to be. The Omicron was the first to introduce a variant with a surprisingly low death rate while being more infectious.

“The big unknown now – and there’s a lot of writing about it – is whether we are now at the point where the virus has gone from a pandemic to an endemic. I think it’s too early to tell. But we’ll closely monitor what the next wave does,” said Strauss.

If insurers see a continuation of fewer deaths despite the rise in infections in the next wave, it might be signs that Covid-19 is becoming endemic, a state in which our bodies learn to live with the virus, and fewer people die from it – more like bad flu.

The Council for Scientific and Industrial Research (CSIR) has predicted that the next surge in infections will happen around the same time as Absa expected.

READ | Suliman echoes Absa on imminent 5th wave – 12 million in SA can still create epidemic

Strauss said the bank-owned insurer has built a rigorous model to predict waves. It considers infection rates, daily Covid-19 deaths, excess deaths statistics, the level of full vaccinations, and the proportion of SA’s population estimated to have had Covid-19 before.

An even less severe wave coming?

To plan how much Covid-19 provisions it should set aside for the envisaged waves, Absa Life also considers its policyholders’ age, which Strauss said is seven to nine years below the industry average.

While the company paid R1 billion in excess claims in 2021 – largely due to high policyholder death rates in the third wave – it hopes this won’t repeat.

READ | Old Mutual records R6.8bn in excess Covid-19 death claims – but it still doubled profits

Strauss said this is why Absa has lower protection for the fourth and fifth waves, despite those excess claims.

“We predict an even less severe, less deadly wave five as we hope to see an increase in vaccinations and start to see a lot of herd immunity,” said Strauss.

He said Absa Life has been burying itself in scientifically peer-reviewed research to predict the waves and plan its response.

To try and insulate itself more, Absa Life has included more Covid-19-related questions in its underwriting questions, and many of its customers are not fully underwritten. But because new policies only make up about 15% of its total book every year, it still didn’t know the vaccination and prior infection status of the majority of its client base.

Like many other insurers, Absa Life launched a Covid-19 vaccination competition giving away R2.2 million in total. It managed to get a response from 10% of its existing customers. Half of the client base that gave proof of vaccination were 50 years and older.

“So, we seem to be well protected, from a vaccination perspective, on the older age rated books. But I think the good thing is that there is still a consistent theme that the younger ages seem to be more resilient,” said Strauss.

Paid claims brought more business

Overall, Absa Life’s claims in SA increased by 49% in 2021 due to Covid-19 deaths and retrenchment claims. 

Absa Life and FNB Life decided to continue offering retrenchment cover when traditional insurers stopped taking new customers due to job losses at the beginning of the lockdown. Others had stopped years before because of the rising job losses in SA.

Strauss said despite that, retrenchment claims came below what the company expected. Meanwhile, that move, and the payment of Covid-19 death claims seem to have helped the insurer win over more consumers. Absa Life grew new business volumes by 45% in 2021.

“It’s also been an opportunity, and I mean that in a caring sense. We got to show customers that we are there for them. Yes, there are still a lot of things we’re monitoring around a pandemic. But it’s also shown that if you care for customers during this time, they reward you by trusting you with new business,” said Strauss.

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