Desperate insurers use loopholes to sneak in business during lockdown, says watchdog

The Financial Sector Conduct Authority has warned insurers who continue to send and collect blood samples to the country’s stretched laboratories that they are “unnecessarily” distracting them from focusing on containing the coronavirus pandemic.

The regulator said some insurers “may have declared travelling nurses as essential services in the lockdown period, to collect blood samples for new business underwriting purposes”. It said companies and individuals who continue approaching laboratories for what it deems non-essential services will be subjected to “appropriate regulatory action”.

South Africa is in its first week of a national lockdown, with over 1 300 confirmed cases of Covid-19 novel coronavirus and three confirmed deaths.

When President Cyril Ramaphosa declared the national lockdown, he allowed provisions for state personnel who provide essential services, including healthcare and security, to continue movement to assist with the pandemic and monitoring the lockdown.

“This not only exposes these nurses and customers unnecessarily but detracts from the ability of laboratories to focus efforts on the pandemic. Given the burden on our laboratories for the testing of Covid-19, it is of paramount importance that no additional stress is placed on the medical fraternity,” the statement said.

The regulator’s warning means insurers must cease writing new business for cover that requires medical underwriting such as life, disability and income protection, unless they are selling limited amounts in which basic paper-based risk assessment is done.

Alternatively, they will need to employ new techniques to keep business going, especially if laboratories get overwhelmed by Covid-19 testing past the lockdown period.

Finding alternatives to keep business open

The country’s largest life insurer, Sanlam, said it will not require prospective clients to undergo insurance medicals during this lockdown period.

“However, we recognise that during these times, clients need cover. And Sanlam needs to provide a service during this time, in a safe and responsible manner. These medicals, whether compulsory or randomly selected, will therefore be postponed until after the lockdown,” said Sanlam in a written response.

The insurer said it continues to issue new cover and is working on an underwriting model whereby, where practical and sensible, cover can be sold and effected immediately on the basis that basic underwriting tests will have to be provided as soon as they become available.

Momentum’s head of life insurance marketing, George Kolbe, said the insurer’s doctors and nurses are not doing any underwriting medicals during the lockdown period, but the company is scheduling appointments so that it can resume with normal operations after the lockdown.

Discovery Life said because underwriters and nurses do not form part of its essential services personnel, it has decided to use its “technological assets” to process a large proportion of new business and in servicing existing customers. These include auto-underwriting and “SmartUnderwriting”. 

“Where we have received the required client consent, we are able to use enhanced data capabilities to access existing data for a prospective client including from past underwriting, to automatically fulfill any underwriting requirements,” said Discovery Life COO explaining the insurer’s automatic underwriting capabilities. 

Liberty, which also suspended travelling by nurses last week, said it will make use of tele-underwriting as well as the normal application form. For now, it has suspended medical requirements.

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