Premium and Cover Lock-in Qorus-NTT DATA Innovation in Insurance Awards 2025

Concept and objectives This benefit was designed to address two key needs that clients have, and by addressing those needs is expected to improve persistency experience for the insurer.

The first is that clients need affordable life insurance premiums in retirement, specifically because they will have a reduced income post-retirement. In South Africa, conventional life insurance premiums have age-related premium increases, which result in bigger premium increases at higher ages where a client is more at risk to claim. The Lock-in benefit utilises pre-funding in that clients pay an additional lock-in premium is paid to remove the age-related premium increases from the entire policy premium from age 65.

Clients therefore pay a higher premium initially, and then when Lock-in matures, their premium increases are reduced, leading to a smaller premium than they otherwise would have paid at later ages.

The second need which this benefit solves for is that given clients are more at risk of claiming at higher ages, they still need life cover, and importantly cover growth, at those higher ages. Lock-in ensures there is cover growth, at either 5% or CPI, from age 65 to 80, meeting clients needs at those ages.

South Africans require risk cover in retirement for protection against the medical costs which are a result of sickness or disability. These policyholders would otherwise have to privately fund these expenses due to a lack of options available through the state.

Additionally, having risk protection in retirement is an effective and efficient tool for inter-generational wealth transfer. More people around the world are working past retirement age, which means that their estate continues to grow. This accentuates the need for cover to grow in retirement, to keep up with the growth of individuals’ estates, and ensure that they have sufficient cover to facilitate cost-effective wealth transfer.

The Association for Savings and Investment South Africa (ASISA) said in 2022 that income earners in South Africa only have enough life and disability insurance to cover 45% if their household’s total insurance needs. This gap is exacerbated in retirement where insurance premiums become less affordable relative to income earnings.

Typical pre-funding benefits such as Paid-up cover have level cover from age 65, which means that while premiums are not payable and the cover is fully funded, it is also depreciating in real terms over time. The Lock-in benefit was inspired by the fact that clients’ needs in retirement, such as for wealth transfer, sickness cover to aid medical aid and family protection, do not depreciate.

Competitor landscape This benefit is completely unique in the South African Life insurance market, with no competitors offering a pre-funding benefit which still has cover growth post 65.

Departments Involved It was developed and priced by the Product development team, and the launch was handled by the Technical Marketing team.

Sources of inspiration As mentioned above, sustainability was a key issue which this project aimed to solve for, and it was through looking at the expected lapse experience of existing policies, many of which are going to get high premium increases when they reach 65, that encouraged a look into a sustainability mechanism to make premiums more affordable in retirement and thus improve lapse experience.

It has also been designed so that it can be added to existing policies, allowing clients who foresee their future post-retirement increases being too high to pay now to reduce those increases later.

Main results Since the 1 October 2024 launch, lock-in has been added to 370 policies, both new and existing. The effect of this benefit is expected to be observed once these clients reach lock-in age and have lower premium increases than they otherwise would experience, which is expected to reduce lapses at those ages. Using internal data to determine an expected survival age for these clients, we expect the average effective tax free rate of return on these clients’ lock-in premiums to be greater than 12% when compared to alternative funding mechanisms.