Unvaccinated new customers will pay more for cover, says FMI

Durban - Life insurer FMI says it has started reviewing the vaccination status of new customers at risk assessment stage, which means that unvaccinated new customers will, in certain categories, now be subject to higher premiums for cover.

The move only applies to new policy applications from 1 January, and policyholders with existing cover will not be affected.

The move comes in response to the ongoing impact of COVID-19 on the industry, which has seen a significant increase in claims. According to ASISA, insurers saw an increase of 43% in death claims in the period from 1 April 2020 to 31 March 2021, compared to the previous 12 months.

From January 1, all applications with Life Lump Sum or Life Income cover included will require the applicant to provide proof of COVID-19 vaccination. If proof is not provided, the applicant will be assumed to be unvaccinated, and a loading will be applied to the quoted Life Lump Sum and Life Income benefits. If the policyholder can submit proof of vaccination in the future, the loading will be reviewed.

FMI’s Chief Product Actuary, Leza Wells, said data showed a clear higher mortality risk for unvaccinated people, while vaccines significantly reduced the risk of hospitalisation and death from COVID-19. Insurers had to consider risk indicators to health, and price accordingly, if they were to remain able to meet their obligations in the insurance contract.

“The broader industry has taken a view around fairness to our customers, which says the vaccinated shouldn’t have to subsidise the unvaccinated, in the same way that non-smokers shouldn’t have to subsidise smokers. If someone has a family history of cancer and they are a higher cancer risk, we take this into account, so by the same token, a higher predisposition to Covid-19 deaths can be factored in,” said Wells.  

Applications for other benefits from people who are at higher risk, such as older people or people with co-morbidities, may also require the applicant to provide proof of vaccination, depending on the individual circumstances. Existing policies will be unaffected, but if policyholders apply to add or increase cover without a future insurability option, that increase will be subject to the same rules as new business.

Prospective policyholders who cannot be vaccinated for medical reasons will still be subject to the loading, as the additional risk of death due to COVID-19 remains. “The loading is to ensure that the premium an insurer receives is appropriate for the cover that they provide,” said Wells.

Wells said there were several contentious issues around the pandemic and vaccinations, including the role of natural immunity and how long vaccinations last, but the industry had clearly moved towards pricing in the higher risk of being unvaccinated. FMI will continue to review the evolution of the pandemic, and may consider removing the loadings if the risks of COVID-19 become immaterial in future.

“Our understanding of COVID-19, and the risks it presents, is changing all the time. The current rules have been made according to our existing view of the pandemic, and may need to be updated as new evidence emerges,” she said.