Impact of COVID on the Industry

It’s been two years since COVID-19 was officially named a pandemic by the World Health Organization (WHO), and it seems that we have adjusted to the pandemic. But what does this mean - and what lessons can we take with us?

The impact of COVID-19 on long-term Insurers and policies is starting to take effect, unfortunately, they have no choice but to increase their rates due to the significantly high claims experience.

Association for Savings and Investment South Africa (ASISA) recently published an article regarding claims paid, “Policyholders and beneficiaries received claims and benefit payments worth R608 billion from South African life insurers in 2021, the highest ever paid in a single year. The payments included claims against life, disability, critical illness and income protection policies, as well as retirement annuity and endowment policy benefits.”

“The long-term insurance statistics released today by the ASISA show that despite these historic pay-outs, the industry remains well capitalised and in a strong position to honour contractual promises made to policyholders and their beneficiaries.”

The increased demand by Insurers for policyholders to be vaccinated is going to be an interesting one. Attached is a further article from ASISA.

COVID-19 National State of Disaster allowed the FSCA to assist Participating Employers / Employees of Retirement Funds in financial distress with contribution holidays. Government together with the Retirement Fund Industry continue to look for ways to assist members, such as the proposed Two-Pot System.

Employees of Retirement Funds not only had concerns about not contributing to their Fund but also had to worry about the markets they were invested in. In 2020 the world experienced an unprecedented phenomenon where governments, corporates, small businesses, and individuals were struggling to grasp the effects of the Covid-19 pandemic. There were high levels of volatility in the markets as a result of the pandemic, causing a large sell-off by investors in the equity markets to safer asset classes. March and April 2020 again confirmed the importance of not dashing to cash. The JSE had lost approximately a third of its value during the crash and the market fully recovered by August 2020. GIB’s articles regarding this period can be found on https://www.gib.co.za/blog/

Key lessons you may have learnt from the impact of COVID-19?

• The most important thing is you and your family

• Ensuring that I have a valid and updated Will, which is easy to do, and has a huge impact

• Keep an emergency fund

• Ensuring that my family and I are adequately covered not only for death, but the impact should I become disabled by the long-term effects of COVID-19 (“long COVID”)

• Retirement planning is an ongoing process

• The importance of not dashing to cash and sticking to your investment mandate

We understand that this can seem difficult to action, but having a financial planner to guide you through the above lessons can help protect you and your family.