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Some of South Africa’s insurers have stopped selling downsizing coverage as the new coronavirus threatens to accelerate the unemployment rate in the country. During an internet broadcast with financial advisers, the FMI insurer, which is part of Bidvest Life Limited, said it had received communication that some of the industry players were no longer accepting new applications for downsizing coverage.
This comes at a time when preliminary estimates released by the Reserve Bank of South Africa on Tuesday show that the country could lose some 370,000 jobs this year.
Insurance to cover reductions is not widely available in South Africa. Of the big five listed insurers, only Liberty and Old Mutual offer it. Liberty also subscribes to Frank.net, another smaller insurer that offers downsizing coverage. This insurance product normally covers a portion of people’s wages, generally up to 75% for six months after the involuntary reduction.
Liberty pauses the reduction cover
Liberty confirmed on Wednesday that its reduction coverage is no longer open for new business.
“Liberty confirms the temporary suspension of the downsizing sale and the short-term insurance benefits that cover the loss of income. Given the uncertainty related to the Covid-19 pandemic, it is very difficult to assess potential risks and coverage for new customers, “said David Jewell, executive, retail solutions group at Liberty.
He said the insurer’s focus right now is to ensure that it meets all valid claims from current customers, adding that existing benefits will remain the same. Old Mutual had not confirmed at the time of publishing the story if it was still selling its Greenlight reduction cover.
As for banks, most provide coverage to pay monthly client debt installments in the event of downsizing. But Absa, which also pays a limited-income benefit, only R5,000 for two months, said it still accepts new applications.
“However, consumers should be aware that some of these products have a standard waiting period of three to six months,” said Dushen Naidoo, executive manager of insurance for Absa Retail and Business Bank SA.
New customers unlikely to be covered for Covid-19
Samuel said the IMF also continued to offer downsizing coverage to new clients, but that only certain people would qualify.
These are full-time and permanently employed people who have received a salary for at least the past two years. But someone who recently changed employers and has not received a salary from the same employer for at least a year, will also not make the cut.
People working in the mining, construction and fishing industries are completely excluded, even if they are in support roles like IT, the IMF criteria set. A standard six-month waiting period and various other conditions also apply.
“Yes, it is understandable that there are more Ts and C with this benefit, but I think it is important that people know the terms and conditions in advance to avoid disappointment [the] claim stage, “said Samuel.
