The only insurance benefits many South Africans have is their employer's group insurance benefits to meet their household's financial needs in the event of death, disability or critical illness. The current times are a sharp reminder of the tremendous value that group insurance benefits offer employees.
Rudi van Rooyen
Despite the financial pressures experienced by many employers due to the Covid-19 pandemic, it is important that they do everything possible to continue providing this high-value, cost-efficient employee benefit.
The Financial Sector Conduct Authority (FSCA) and insurers across the industry have made similar appeals, highlighting how failure to pay group insurance premiums could have a devastating effect on the many families who may need to claim during this period.
But, many South African employers are battling to keep the lights on and the doors open. StatsSA recently reported in a Covid-19 related survey that over 85% of participating businesses reported turnover below the normal range and 46% indicated temporary closure or paused trading due to the lockdown.
If cash flow pressures are severe, a business could consider suspending retirement funding contributions for a couple of months, but as far as possible try to continue paying group insurance premiums during these challenging times. Many progressive retirement funds are already offering employers with cash flow pressures the flexibility of putting contributions on hold.
What about insurers?
Unfortunately it’s simply not viable for insurers to allow companies to enjoy the same level of group insurance cover for their employees if premiums are not paid, even for a short period. The vast majority of premiums received are used to pay claims, so offering distressed businesses a premium holiday could impact on an insurer’s ability to pay the valid claims of other premium-paying businesses.
To avoid unnecessary lapses in cover, the FSCA has recommended that insurers consider a grace period where premiums not paid on the due date can be brought up to date. This can help employers manage cash flow more effectively over this period while still maintaining cover, although premiums still need to be paid at the end of the grace period.
Employers should also try to identify potential income from not-so-obvious sources. Businesses could for example use the reward programmes attached to their insurance for any Covid-19 business continuity initiatives. This could include safety and sanitation measures for workplace integration or measures to support staff working remotely. The programme usually requires that rewards are used for corporate wellness or educational activations.
Another option for employers is to sit down with their financial adviser and relook benefit structures to find the right balance between appropriate benefit levels and affordable premiums.
That said, while insurers are doing as much as possible to help employers maintain insurance cover during these times, there will be instances where companies cancel their group scheme, are liquidated or fail to pay premiums, resulting in termination of the policy. Sadly this will mean that some employees will find themselves without cover at a time when they need it most. If the group insurance scheme has a continuation option, employees will have the option of converting to an individual insurance policy without medical underwriting.
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