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5 Mind boggling stats we uncovered about Life Insurance claims [Fact can be stranger than fiction]

Posted 5 March, 2020 by Clearly
in Technical Smechnical

 

Before we dive right into this, it is imperative that you are suitably armed with a saying:

“There are lies, damned lies, and statistics.”

 

People always wrongly attribute this quote to me: Mark Twain

 

Should statistics matter?

Yes, but no.

(You knew this was coming, right?)

 

It matters because it gives us a bird’s eye view of the trends, probabilities, and patterns that arise – ostensibly to our benefit.

And no, statistics do not matter – because while there is such a thing as the average person, you are not him or her.

I.e., the improbability of an event has got nothing to do with the huge consequences a victim has to bear – just ask anyone struck by lightning if he takes comfort in that occurrence being impossibly slim. Statistically, it should not happen, but still, it did (to him).

 

Cool tattoo, and cool story bro. That’s only a 1 in 300,000 chance

 

With that, let’s dive right in.

 

The backstory

 

We received a tip-off that one insurer publishes data about its Life Insurance claims (ie, claims that were paid out) on a monthly basis.

Trust the ever socially conscious NTUC Income to do just that. Source here.

(To be fair, MAS does have data on claims as well, just not as granular as the one provided by Income)

What data do they provide?

 

 

They show the claims successfully paid out each month, broken up into the number of cases and total amount (SGD) across the 3 major coverage types: Death, Critical Illness, and Total & Permanent Disability (TPD).

Let’s call this Aggregated Data.

And within the monthly Aggregated data, they also state more details about each claim that is larger than $100,000.

Let’s call this Granular Data.

 

In summary, we have some idea about ALL their claims for the past 3 years, and we have more in-depth information about SOME of their claims for the past 3 years.

Here’s five mindboggling stats we dug out from the numbers, along with our commentary.

 

Stat 1: Death Accounts for less than half of all the Life Insurance Claims

 

Am I a joke to you?

 

Wait, I thought everyone dies?

Total number of claims: 8,600
Total number of claims due to death: 4,100

(figures rounded to nearest hundred)

So 47.7% of Life Insurance claims are due to Death.

 

Our hypothesis:

Life Insurance plans generally consist of 3 components (Death, Critical Illness, and TPD). Many policies pay out only once, upon the occurrence of any of these 3 events, and then the policy terminates. (say a term plan or whole life plan)

With Critical Illnesses (CI) becoming more and more frequent, it is entirely possible that many plans are triggered by CI and pay out their full amount.

In fact, we predict that CI claims will even be more prevalent in the near future, and could overtake claims due to death.

 

Stat 2: Critical Illnesses have already overtaken Death as the leading cause for claims

 

Ah, we hate being proven right so soon!

 

 

Total number of claims: 8,600
Total number of claims due to CI: 4,300

So literally 1 in 2 claims are due to CI, edging out death.

 

Our hypothesis:

None needed, actually. This has already been in the cards if you read our articles about critical illness here, here, and here.

This also means the remainder of claims is due to TPD, which accounts for a measly 2.3%. But do remember our point about the guy and the lightning.

 

Stat 3: Only 1 in 7 claims (paid out) is larger than $100,000

 

 

That seems to be a dismally small amount. (We’ll explain later)

Total number of claims: 8,600
Total number of claims above $100,000 in size: 1,200

13.9% translates to 1 in 7 people (its cooler if you do math this way)

 

Our hypothesis:

Among all the numbers available, this is the most dismal one to us. Because it indicates that either NTUC Income is really good at paying out small amounts (unlikely, because a contract is a contract), or it means that most people do not buy coverage that is larger than $100,000.

Personally, my own death (and TPD) cover is more than half a million, and approximately 400k for CI. That is just for me, being a happy single.

This stat ties in very gravely with the Life Insurance Protection Study that was done, and we covered it here.

(And yes, the gist is… Singaporeans are grossly undercovered)

 

Stat 4: Cancer accounts for a staggering amount of claims for CI (7 in 10)

 

We turn to the granular data for this (CI cases paying out more than $100,000)

Total number of CI Claims more than $100,000: 670
Total number of those claims due to cancer: 490

So 73% of CI claims are due to cancer, with its next nearest competitor (heart attack) accounting for a measly 10%.

 

Ok you lot, I have some bad news for you…

 

Our hypothesis:

Again, no need for a hypothesis but rather a comment on the effect on the industry. We have seen the number of “Cancer only” policies being sold skyrocket in the past five years, and this is no coincidence.

Which brings us to our final concluding stat, the one that is the most sobering of all.

 

Stat 5: Cancer, unlike lightning, can strike twice. It is the leading cause of Death claims (you read that right!)

 

Ok, this is actually a bit untrue. Lightning does strike twice or more at the same place.

But to our surprise, not only is cancer the leading cause of claims for CI, it is also the leading cause of claim for Death. (40%)

Yikes!

Total number of Death claims more than $100,000: 490
Total number of such claims due to cancer: 195

 

You get a cancer! You get a cancer!

 

Its usual BFF (heart attack) is half as efficient, accounting for 18% for all such death claims.

 

Our hypothesis:

Bearing in mind these numbers are for larger claim quantums only, but the sample size is large enough to draw meaningful conclusions from.

So what happened to dying peacefully, surrounded by your loved ones or during your slumber? Statistically, we have to shelve that notion. And start paying more attention to our diet, lifestyle, and risk factors.

But hey, never say never.

 

Share with us your thoughts!

 

Do you have other interpretations of the numbers presented?
Do you have other insights to share?
Do you agree or disagree with the stats presented here?

Let us know in the comments below, because we want to hear from you!

 

www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

Shout out to the folks from SmartWealth who suggested we look into this.

We are also in the midst of building a top-secret new platform that will change the way people view financial planning. PS. It does not contain lame hyperboles like “fintech” or “insurtech” or “machine-learning” or “AI”.

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