Advertise Here


IconAssociations & Institutes
IconBBBEE Consulting and Verification Agencies
IconBenefit Administrators & Investment Managers
IconBusiness Chambers
IconBusiness Process Management
IconBusiness Process Outsourcing
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconDebit Order Collection Facilities
IconEducation and Training
IconHuman Resources
IconInformation Technology and Software Partners
IconPension Fund Trustee Liability Insurance
IconPension Fund Trustee Training
IconPension Funds Adjudicator
IconPolicy Administration
IconPolicy Trading
IconRegulatory Authorities
IconRetirement Funds registered by the FSB
IconRetirement Products
IconSocial Grants (Government)
IconSurveys and Research
IconTraining Courses & Workshops
IconTrust Establishment & Management
IconWellness Programs
Advertise Here
  Subscribe To »

Longevity favours the rich, but poor also benefit in new generation life annuities






Most conventional life annuities are priced against just two factors that influence longevity – age and sex.  Yet there is a host of other factors that should be considered in arriving at a fair price for each person. 


This is one of the reasons that life annuities fell out of favour for over a decade.  “People from lower income brackets started to question their value, and they were right,” says Deane Moore, CEO of retirement income specialists Just SA.


Unlike living annuities, life annuities provide a guaranteed income for life. This is achieved by risk-pooling to evenly spread the risk among policyholders (essentially how insurance works).  A guaranteed life annuity’s total value is the sum of its starting income and the expected future increases over a long-term investment horizon. The question is how much income does each person receive?  Or, looked at another way, what price does each person pay for an income for life?


A just price, based on individual risk

South Africa is a very diverse country with vastly different levels of economic opportunity, and access to healthcare, nutrition, and education.  As a result, higher incidences of serious diseases such as diabetes and heart disease are more prevalent among those in lower income brackets.  Consequently, those from poorer backgrounds tend to have a shorter lifespan than those who are wealthier. When the funds of a wide variety of people are pooled together in a conventional life annuity, the poor, who tend to die sooner than expected, subsidise those who live longer than expected – which is likely to be the wealthier policyholders.


In South Africa, where the differences between diverse segments of the population are so vast, it is not just to price as if they are. This was also recognised by Treasury in its series of retirement reform papers published between 2012 and 2014.


Underwriting holds the key

“People have a right to purchase a life annuity at a price that fairly reflects their individual risk,” says Moore. One way to achieve this is to use underwriting to find out a lot more about a retiree than his or her age and sex to assess their life expectancy more accurately.


While life insurance policies use medical underwriting to charge those who are ill a higher premium, life annuities use underwriting as a fair way of ensuring you get the right income, for life. This gives you confidence that you are getting the highest possible starting income for your retirement savings, which is important as any subsequent increases are based on your starting point.


When a potential client applies for any of the annuities that Just offers, they are likely to be asked a series of medical, income, education, and lifestyle questions.  If their answers put them at risk of dying younger than the average person, their policy is priced accordingly.  This could result in, for example, a 10% ‘uplift’ in their monthly income as they are only expected to live 18 years as opposed to 20 years.


“This is especially fair for lower income individuals as their chances of living a long life into their 80s or 90s are unfortunately limited by the factors we’ve mentioned,” Moore says.  


In fact, over the past five years, 40% number of Just SA’s policyholders are enjoying a higher monthly income than they would have without any underwriting.


Underwriting for spouses

Something to understand is that if an individual wants to buy a life annuity policy and leave a legacy of an income for life for his or her spouse, both people will go through the underwriting process. 


“If one of the spouses is ill, but the other is healthy, we have to take both lives into account when pricing the policy,” Moore concludes.


Source: Just SA
« Back to previous page Print this page » |

Breaking News »

The Implications Of Overloaded Vehicles On Your Insurance Policy

Overloading – it’s a common occurrence on our roads. If we don’t drive past an overloaded bus, taxi or truck, then we read about another horrific accident caused by one. Hundreds of passengers ...
Read More »


Supporting Brokers In Optimising The Claims Experience Of Their Clients.

TANSA is a team of dedicated professional Attorneys, Forensic accountants, Disaster Claims Experts and Insurance Specialists focused on Insurance Claims & Dispute Resolution. Their mission is to support ...
Read More »


From the Desk of the Chief Executive: Viviene Pearson

The government kicked off its phase 2 of the COVID-19 vaccinations in earnest during May 2021, with minimal people in the 60+ age group registering discontent. It is pleasing to know that the government had progressed ...
Read More »


Fourfold increase in death claims against fully underwritten life policies during second Covid-19 wave

Four of South Africa’s largest life insurers reported increases of between 50% and 60% in death claims against fully underwritten new generation individual life policies between March last year, when the ...
Read More »


More News »


Healthcare »


Investment »


Life »


Short-term »

Advertise Here
Advertise Here

From The Glossary »


Winning/(Losing) Active Industry Exposures:

Indicates the active industry bets that made the largest/(smallest) contribution to active returns over the quarter.
More Definitions »






Contact IG


Media Pack


RSS Feeds

By using this website you agree to the Terms of Use.
Copyright © Insurance Gateway (Pty) Ltd 2004 - 2021. All Rights Reserved.