Product comparison Discovery Life and Sanlam

Transcription

1 Product comparison Discovery Life and Sanlam

2 Description Page Funding patterns 3 Premium guarantees 6 Benefits for remaining healthy 7 Death benefit 9 Protection from adverse economic conditions 10 Minimum Protected Fund versus standalone benefits 11 Lump sum disability benefits 13 Income disability benefits and the Overhead Expenses Benefit 23 Dread disease benefits 31 Female Severe Illness Benefit and Childbirth Benefit 38 Child Severe Illness Benefit 39 Family Trauma Benefit 39 Parent Severe Illness Benefit 39 Future cover without medical underwriting 40 Premium waivers 41 Cover in "real" currencies 42 Indemnity benefits 44 General exclusions 46 July 2010

3 Sanlam Discovery s comments Funding patterns Discovery Life has four funding patterns: 1. The AcceleRater Plan: The Automatic Contribution Increases (ACI) and Automatic Benefit Increases (ABI) are set out below: ACI / ABI combinations Age next ACI for ABI = 3% ACI for ABI = CPI < % CPI + 3.0% % CPI + 3.0% % CPI % % CPI + 6.5% % CPI + 7.5% % CPI + 8.5% % CPI + 9.0% ACI increases linearly within age bands. 2. The SupeRater Plan: Provides for the following: Discounts on the AcceleRater rates for whole-of-life benefits of between 12.5% and 20% The same annual premium increases as the AcceleRater Plan An additional compulsory increase of 20% every ten years. The increase every ten years only applies to premiums that were discounted upfront and not the total premium. The SupeRater Plan will overtake the AcceleRater Plan after approximately 20 years. Sanlam has four funding patterns: 1. Fixed compulsory growth ACI / ABI combinations ACI ABI 5% 0% 10% 3.5% 7% with whole-of-life guarantee 0% 11% with whole-of-life guarantee 3.5% 2. Age-related compulsory growth: There are two options, namely an Aggressive option and a Standard option The Aggressive option starts with a lower initial premium but has steeper premium increases than the Standard option. ACI / ABI combinations Aggressive option Standard option Age ACI % ACI% next ABI 0% ABI 3.5% ABI 0% ABI 3.5% < 29 3% 7.5% 0% 4.5% % 8.5% 0% 4.5% % 9.5% 2% 6.5% % 10.5% 2% 6.5% 35 7% 11.5% 2% 6.5% 36 7% 11.5% 3% 7.5% % 12.5% 3% 7.5% % 13.5% 3% 7.5% % 14.5% 4% 8.5% % 14.5% 5% 9.5% % 14.5% 6% 10.5% % 14.5% 7% 11.5% % 14.5% 8% 12.5% % 14.5% 9% 13.5% % 14.5% 10% 14.5% On the compulsory premium patterns, a Sanlam policyholder is unable to link the growth of his cover to inflation, the highest cover growth option being 3.5% pa. This will often be inappropriate from a financial planning point of view. It is especially problematic with buy-and-sell agreements, where a policyholder s liability (to buy out his partner s share) is linked to the growth of the business. Discovery s AcceleRater with ABI=3% is roughly comparable to the Sanlam Fixed 10% compulsory premium increase. Discovery s SupeRater is most comparable to the Sanlam Standard age related + 3.5% Discovery s increases are capped at the older ages to make them more sustainable, compared to the Sanlam Age-related compulsory growth patterns which have increases at the older ages of approximately 2.5% per annum. Purchasing a Discovery Integrator Plan entitles the policyholder to additional premium reductions at inception of his LIFE PLAN. These are: 15% to 20% on the Health Integrator 15% to 17.5% on the Vitality Integrator 15% on the DiscoveryCard Integrator 29% to 32% on a combination of the Vitality or Health Integrator and DiscoveryCard Integrator The Integrator allows policyholders to control their premiums through their health, wellness and DiscoveryCard spend. They may obtain further premium reductions by progressing through the Vitality statuses from Blue to Diamond status. 3

4 Sanlam Discovery s comments 3. The Standard Plan Premiums remain level over the term for a level amount of cover. Premium and cover increases are specified. ACI / ABI combinations ACI ABI 0% 0% 10% 6.5% CPI + 3.5% CPI 4. The ModeRater Plan: Premiums on whole-of-life benefits are discounted by up to 15% from inception of the policy. Premiums for these discounted benefits increase at 20% every ten years. The additional increase does not apply to benefits that had no initial discount. The ModeRater will overtake the Standard Plan s premiums after approximately twenty years. 3. Level: Growth optional Premiums remain level over the term for a level amount of cover. Premiums are guaranteed for between 5 and 15 years, not for whole of life. (See Premium Guarantee section for more information) There are two options: Option 1: Specified premium and cover growth ACI / ABI combinations ACI ABI 0% 0% 5% 3.5% 10% 7% CPI + 3% CPI (capped at 15%) Option 2: Specified cover growth. Premium increase for additional cover based on new business rates of additional cover at age it is added. ACI / ABI combinations ACI ABI 5% + age factor 5% 10% + age factor 10% CPI + age factor CPI (capped at 15%) R/$ + age factor R/$ (min CPI, max 35%) R/Pound + age factor R/Pound (min CPI, max 35%) R/Euro + age factor R/Euro (min CPI, max 35%) 4. Stepped: Growth optional 1. Premiums remain level over choice of 10 or 15 years for a level amount of cover. 2. Same premium and cover growth combinations as on the Level option. 3. At the end of 10 or 15 years, policy is extended and premium re-calculated every five years based on age at the time of increase. The Discovery Standard Plan should be compared to the Sanlam Level premium pattern. Integration makes Discovery s initial premiums cheaper at virtually every age. All Discovery s plans provide quantified guarantees for whole of life, whereas Sanlam offers no premium guarantees that are quantified for whole of life on their Level premium patterns. This creates uncertainty for the policyholder. Discovery s Global Investment Linkage Option allows ABI to be linked to foreign currency movements. It also allows linkage to global investment benchmarks, which Sanlam does not. Discovery does not link the premiums to foreign currency exposure, thereby creating more certainty for the client. I.e. premiums are fixed in Rands and not subject to volatility of exchange rates which could make the plan unaffordable. (See cover in real currencies for more information) The increases after the first 10 or 15 years and every five years thereafter on the Sanlam Stepped option are based on the age of the policyholder at each date. The percentage increase in premiums at each duration can be compared to the ModeRater Plan as follows: 4

5 Sanlam Discovery s comments Discovery has no equivalent premium pattern. 5. Yearly Rated Growth Only for persons who qualify for rate groups 4 or 5. The payment increase each year is based on the rates applicable for the planholder s age at the time i.e. the planholder s payments will be adjusted yearly. Rates are not guaranteed. Stepped ModeRate r Initial premium R157 R182 Increase after 10 86% 20% yrs Increase after 15 38% 0% yrs Increase after 20 53% 20% yrs Increase after 25 52% 0% yrs Increase after 30 90% 20% yrs *35 year old non-smoker R1m life cover The premiums on the Sanlam Stepped option are clearly not sustainable, as can be seen from the high premium increases reflected in the table above. This leaves great uncertainty for policyholders as there is no guarantee on the premium increase from year to year. Discovery has no equivalent premium pattern. 6. Term cover The term cover products offer cover for each chosen benefit, for the chosen initial guarantee term. 5

6 Premium guarantees Discovery s premiums are priced for whole of life. Should an increase in premium be required, the premium is guaranteed not to increase by more than 25% at the end of 10 years, and every 10 year period thereafter. This applies to all socioeconomic classes of business. Policyholders who are also members of Vitality will enjoy additional premium certainty. The maximum increase of 25% at the end of the 10 year period will be reduced by summing up the percentage reductions for each year at a certain Vitality status as follows: Per Blue status year: 0% Per Bronze status year: 0.5% Per Silver status year: 1.5% Per Gold status year: 2.5% Per Diamond status year: 2.5% Discovery Life does not guarantee premiums for the Global Health Protector, the Global Education Protector, the Global Investment Linkage option, the Health Plan Protector, as well as the Lock-in and Paid-up options as these benefits have unpredictable components namely rand depreciation and medical inflation. Sanlam provides the following guarantee options for Whole Life products (i.e. Matrix Topcover, Cobalt for Professionals Topcover and Glacier Topcover): Guarantee for life To qualify for a lifelong guarantee, compulsory premium growth of 7% or 11% must be chosen at inception of the policy. Guaranteed term between five and 15 years For all payment patterns except stepped Policyholder selects an initial guarantee period between 5 and 15 years. At the end of the first guarantee period, Sanlam guarantees that the maximum premium will not be more than the following: Initial guarantee Maximum % premium period increase 5 years 20% 6 years 21% 7 years 22% 8 years 23% 9 years 24% 10 years 25% 11 years 26% 12 years 27% 13 years 28% 14 years 29% 15 years 30% After the initial guarantee period, premiums are reviewed every five years. Increases are not quantified at these subsequent reviews Guaranteed term 10 or 15 years Only on the Stepped pattern, with premium reviews every five years thereafter, based on age at that point in time. No limit to the increases after guarantee period ends including the first guarantee period. Sanlam only has one guarantee option on Income Protector products (i.e. Matrix Income Protector, Cobalt for Professionals Income Protector, Glacier Income Protector): Policyholder has initial guarantee period of 5 years where Sanlam guarantees premium will not increase by more than 20%. After initial guarantee period, premiums are reviewed every 5 years where no qualified premium guarantees are offered at these subsequent reviews Age Discovery provides certainty for whole of life on all funding plans, whereas Sanlam only quantifies guarantees for whole of life on their 7% and 11% Fixed compulsory growth plans. On all plans other than the 7% and 11% Fixed Compulsory growth plans Sanlam does not quantify guarantees after the initial guarantee period. This leaves policyholders exposed to uncertainty thereafter. On the stepped payment pattern there is no guarantee on premium increases. You could expect to see increases as you get older that look as follows: Premium Increase 40 18% 45 35% 50 42% 55 37% Assumptions: Male non-smoker; R2 mil life cover On Discovery s Income Continuation Benefit you get the same premium guarantees as the rest of the LIFE FUND This provides certainty on future premiums 6

7 The Health Integrator: Offers initial premium reductions up to 20% and uses Health claims and Vitality status to determine future premium increases or decreases. includes the PayBack benefit (on the Classic Life Plan), which provides a return of up to 60% of the policyholder s Life premiums every five years, depending on their Health Plan and LIFE PLAN claims and Vitality status. The Vitality Integrator: Offers initial premium reductions of up to 17.5% and uses Vitality status only to determine future premium increases or decreases. includes the PayBack benefit (on the Classic Life Plan), which provides a return of up to 25% of the policyholder s Life premiums every five years, depending on their LIFE PLAN claims and Vitality status. Sanlam has no equivalent benefits. Sanlam has no equivalent benefits. By incentivizing a healthy lifestyle and providing financial rewards for policyholders, Discovery is able to maintain a healthy risk pool, thereby reducing mortality, morbidity and lapse costs. A policyholder thus has the ability to control future premium increases and increase their PayBack (on the Classic Life Plan) by maintaining a healthy lifestyle. In addition to the normal premium guarantees, Discovery Life offers a further guarantee on the Health Integrator and Vitality Integrator increases through the Maximum Protected Premium. Benefits for remaining healthy The DiscoveryCard Integrator Offers initial premium reductions of 15% and uses Vitality status and DiscoveryCard spend to determine future premium increases or decreases. The DiscoveryCard Integrator can be combined with the Health or Vitality Integrator, resulting in initial premium reductions of up to 32% and 29% respectively. Sanlam has no equivalent benefits. The Cover Integrator The Cover Integrator enables the policyholder to increase his cover by either 20% or 40% of his LIFE FUND. This additional cover is known as Integrated Cover and will fluctuate on an annual basis, based on the Integrated Cover Adjustments which depend on the policyholder s engagement in Vitality. At age 65, the remaining Integrated Cover can be converted to the: Post-retirement Integrated Cover Benefit allowing the remaining Integrated Cover to continue with no future Integrated Cover Adjustments, or Medical Contribution Funder (on the Classic Life Plan) - which provides a monthly Sanlam has no equivalent benefits This Integrated Cover is on average 50% of the normal rates. This premium efficiency has been generated through Discovery s Integrator model. This model has created the opportunity to make use of marginal costing and Discovery s higher levels of persistency to bring down the premiums. The policyholder is able to increase his Integrated Cover, by up to 15% of his initial LIFE FUND on the 20% option and up to 30% of his initial LIFE FUND on the 40% option, for leading a healthy Lifestyle. The policyholder s Integrated Cover will boost all benefits attached to the Life Fund. 7

8 benefit, designed to fund the policyholder s Discovery Health contributions. Discovery has recognized the importance of a Health Plan in retirement. As a result, Discovery has developed an innovative solution that gives the policyholder the ability to convert his unneeded risk cover at retirement, to fund a portion of his Health Plan contribution. The Health Plan Protector Described in detail in Indemnity Benefits section. Offers reward for remaining healthy through Health Dividends and Health Fund Returns a portion of Discovery Health Plan contributions as follows: Health Dividends: Returns a portion of excess health risk contributions over health risk claims every Health Fund: Returns a portion of excess health risk contributions every five years with the balance at the earlier of age 65 or a life-changing event through. Sanlam has no equivalent benefits. This provides a powerful incentive for policyholders to manage their health by returning a portion of Health Plan contributions determined by Vitality status and health risk claims. The Financial Integrator Described in detail in Protection against adverse Economic Conditions section. Sanlam has no equivalent benefits. The annual adjustments to the Financial Integrator Fund work in exactly the same way as the Cover Integrator The policyholder is able to increase his Financial Integrator Fund, by up to 15% of his initial LIFE FUND on the 20% option and up to 30% of his initial LIFE FUND on the 40% option, for leading a healthy Lifestyle. 8

9 Discovery only sells whole-of-life insurance. Sanlam offers whole-of-life and terms assurance. Death benefits Policyholders can structure their policies in three different ways: Life cover benefits on separate policies for principal and spouse: This ensures claims on one life have no impact on benefits of another life. Life cover benefits on one policy for principal and spouse: A claim on one life will reduce the benefits on another life. Should the LIFE FUND be depleted due to the death of the principal or spouse, the surviving spouse may continue with his/her cover, free of medical underwriting. Life cover benefits on one policy for principal and spouse with Minimum Protected Fund: This allows protection of benefits on both lives, irrespective of the number or amount of claims on either life. No equivalent benefit, however, advances on death claims offered Immediate advancement of R (to cover funeral costs and urgent family travel) Payment made within 24 hours without forms, via electronic funds transfer Available on low risk claims (natural causes and where murder is not suspected) Terminal illness Discovery pays the full lump sum death benefit where a policyholder is diagnosed with having less than 12 months to live. Policyholders can structure their policies in the following ways: Death benefits on separate policies for principal and spouse: This ensures claims on one life have no impact on benefits of another life Death benefit on one policy for principal and spouse: Claims on one life have no impact on claims for another life. First Death on one policy for principal and spouse: Claims on one life will impact the benefits of the other life. If a claim under this benefit is admitted, this benefit and accelerator benefits cease. However, the remaining lives linked to this benefit have the option to take out death and accelerator benefits up to the cover amount at date of claim, without proof of health. A claim under an accelerator benefit will reduce the First Death cover amount. Where the cover amount of an accelerator benefit exceeds the reduced First Death cover amount, the accelerator benefit will be reduced to an amount equal to the reduced First Death cover amount. Final Expenses Benefit Pays lump sum on death of insured within 48 hours of Sanlam s requirements having been met. Maximum benefit: R per life assured. Terminal illness Sanlam pays the full lump sum death benefit where a policyholder is diagnosed with having less than 12 months to live. 9

10 The Financial Integrator The Financial Integrator FUND enables a policyholder to increase his cover by either 20% or 40% and is offered at a 10% premium reduction to normal rates. Sanlam has no equivalent benefits. The protector benefits and Cash Conversion can be bought up further. Premiums paid to increase the Financial Integrator Cash Conversion will accumulate towards your 5-yearly Payback benefit. Protection against adverse economic conditions Benefits available with the Financial Integrator: The Asset Protector guarantees an inflationrelated return on your insured assets. The Currency Protector guarantees that your assets maintain their value in hard-currencies (US$ or EURO). The Debt Instalment Protector ensures that any decrease in savings, due to increased debt installments, is replaced The DiscoveryCard Interest Protector helps DiscoveryCard holders by refunding the interest they pay on their DiscoveryCard. The Severe Illness Benefit Medical Booster pays if the costs for medicine after experiencing a defined severe illness is more than R At age 65, through the Financial Integrator Cash Conversion, 10% to 100% of the Financial Integrator FUND will pay out as a cash lump-sum to help with retirement funding. No automatic 10% Cash Conversion on Essential LIFE PLAN All the Protector Buy-Ups include the Protector PayBack benefit. At the earlier of death or age 65, if the premiums that clients have paid for the Buy-ups are higher than the protection they have enjoyed, Discovery will refund any excess premiums at that time. 10

11 Minimum Protected Fund versus standalone benefits Discovery allows policyholders to select the Minimum Protected Fund benefit to ensure protection of cover for future events. This maximizes the potential of multiple claims. Reinstatement of cover applies to all benefits attached to the Life Fund. If you have chosen the Classic LIFE PLAN, the Minimum Protected FUND will reinstate the LIFE FUND, as well as ancillaries, for all future related and unrelated claims independent of their severity. If you have chosen the Essential LIFE PLAN, the Minimum Protected FUND will reinstate the LIFE FUND, as well as ancillaries, for all unrelated claims in different body systems and only related claims or claims in the same body system that are of a higher severity than your previous claim. The maximum payout that the Minimum Protected FUND can add to any related benefit or benefit in the same body system is an additional 100% of that benefit amount plus any automatic benefit increases. The Minimum Protected Fund applies to the: o LIFE FUND o Cover Integrator FUND o Financial Integrator FUND You may select up to a 100% MPF. Discovery further offers a non-accelerated Capital Disability Benefit for the principal life. Policyholders still need a Life Plan to take advantage of this benefit. Discovery also offers non-accelerated Severe Illness Benefit for both the principle and spouse. Policyholders still need a LIFE PLAN to take advantage of this benefit. The Severe Illness Benefit amount may exceed the amount of the Life Cover on the LIFE PLAN. This automatically includes a 100% MPF on the Classic LIFE PLAN. Discovery also allows policyholders to select the Impairment Fund, which is a stand-alone Severe Illness Benefit. Claims on this benefit have no impact on the Life Fund. Can select this benefit without having a Life Fund Sanlam allows policyholders to choose certain benefits on a non-accelerated basis. This means that claims on these benefits have no impact on other benefit amounts. The sum assured selected on standalone lump sum disability benefits is the maximum that can be paid out over the lifetime of the insured, i.e. the benefit terminates once the full benefit amount is paid out. On Sanlam s standalone dread disease benefits, policyholders can claim in excess of the original sum assured, should a subsequent claim arise for an illness unrelated to a previous claim. A non-accelerated benefit is different from the effect of the Minimum Protected Fund. Consider this example: If you choose any of Sanlam s lump sum disability benefits for R1m of cover, the maximum payout will be R1m. If you choose Discovery s Comprehensive Plus Capital Disability Benefit on the Classic LIFE PLAN for R1m and a Minimum Protected Fund of 100%, the maximum payout for a particular disability is R1.225m (nine payments of R for Category C payouts, one payment of R for a Category B payout after 24 months, and one payment of R for an upgrade from the Category B payout to Category A payout after 36 months). In the Discovery example, the expected claim size is considerably larger and the full R1m cover for Capital Disability is available for future claims. Discovery s Minimum Protected Fund reinstates all benefits linked to the LIFE FUND and not only the dread disease cover, as is the case with Sanlam. The Minimum Protected Fund is a unique benefit offered by Discovery. It allows policyholders to choose the degree to which their benefits act as an accelerated or a nonaccelerated benefit. The effect of the Minimum Protected Fund (on the Classic Life Plan) is also well illustrated with the Severe Illness Benefit. Cover is reinstated for future claims on the same illness or on different illnesses, with potential total payouts being well in excess of the initial sum insured over the person s lifetime. On Sanlam s stand-alone dread disease benefits, cover is only reinstated for illnesses not related to previous claims. It is Discovery s belief that reinstatement of cover for illnesses that the policyholder has already suffered from is more valuable than reinstatement of cover for unrelated future claims, as the likelihood of suffering a related claim is far more than an unrelated one. 11

12 Sanlam has a 14-day survival period (without the use of life support) on its Dread Disease benefits and a 30-day survival period on its Functional Impairment and Functional Impairment plus Disability benefits. Imposing 14-day survival period results in less claims being paid. For example 1 out of 17 heart-attack victims aged 50 will die within 14-days. For strokes this goes up to 1 in 11. Sanlam s survival period is especially relevant under its non-accelerated benefit options, where premiums may be paid for many years without any benefit paid on death during the survival period. Discovery has no general survival period for a payout. There is only a 14-day survival period for the Minimum Protected Fund to reinstate cover. Should the policyholder with Discovery s Impairment Fund (standalone Severe Illness Benefit) or non-accelerated Capital Disability Benefit die within any period after submitting a claim, he will receive his Severe Illness / nonaccelerated Capital Disability Benefit and his Life Cover Benefit. With Sanlam he would only receive his life cover benefit. 12

13 Discovery offers four lump sum disability options, namely 1. Core Capital Disability Benefit 2. Comprehensive PLUS Capital Disability Benefit 3. LifeTime Capital Disability Benefit 4. LifeTime PLUS Capital Disability Benefit All available on both the Classic and Essential LIFE PLANs Sanlam offers six lump sum disability products: Disability for regular occupation* 1. Disability for regular and reasonable alternative occupation* 2. Functional Impairment 3. Functional Impairment plus Disability for regular occupation 4. Functional Impairment plus Disability for regular and reasonable alternative occupation 5. Physical Impairment *Back and mental disorder exclusions apply. May also be taken without these exclusions, subject to a loading on the normal rates The table below sets out the products on the most like-for-like basis. With Discovery, the Essential Plan should be used due to the unique features of Classic Plan which are not offered by Sanlam:*: Discovery Sanlam Core Disability for regular occupation* Comprehensive Functional Impairment Plus plus Disability for regular occupation* LifeTime No equivalent LifeTime PLUS No equivalent * Note: Sanlam s occupational disability benefits taper, so for a complete like-for-like comparison select the benefit without tapering. ALSO Back and mental disorder exclusions apply on the occupational underpin, so for a complete like-for-like comparison we need to select the benefit with the exclusion removed. Lump sum disability benefits Claims are assessed based on: Objective medical criteria Activities of daily living Loss of income (under the Comprehensive Plus option) Ability to perform nominated occupation Objectively and clinically assessed LifeTime Impact Factors (under the LifeTime options) Future salary growth (under the LifeTime options) Covers total and partial permanent disability (partial disability covered at 50% through the Comprehensive Plus option) No general waiting or survival period Claims are assessed based on: Ability to perform regular occupation or any reasonable alternative occupation (depending on option selected) Functional Impairment definitions (depending on option selected) or Physical impairment (if benefit has been selected) Covers total and partial permanent disability. (Partial permanent disability covered at 25%,50% or 75% through the Functional Impairment definitions) 30-day survival period on the Functional Impairment, Functional Impairment plus Disability and Physical Impairment benefits. The unique features of the Classic LIFE PLAN are: Category C Disability Claims Dynamic Spend Protector Unlimited multiple claims Unlike Sanlam s benefit, Discovery s benefit has no back and mental disorder exclusions covers temporary disability through a unique loss-of-income underpin boosts the payout based on the LifeTime Impact Factors which considers the long term impact of a loss of income has no survival period requirement offers cover up to age 70 does not taper offers reinstatement of cover through the Minimum Protected Fund converts to severe illness cover for whole of life at benefit expiry, free of medical underwriting the Dynamic Spend Protector boosts DiscoveryCard cash backs by up to 50% has nominated occupation underpin, which provides far more certainty than their occupational underpin. 13

14 Maximum expiry age of 65 or 70, and then converts to Severe Illness Benefit for whole of life, free of medical underwriting No reduction of benefit until benefit expiry age i.e. no taper of benefit All products can be taken out on an accelerated or non-accelerated basis Maximum expiry age 65 (except the Physical Impairment Benefit, which can be taken for whole of life as well). Benefit tapers by 20% per annum from age 60 (for claims submitted for occupational disability.) All products can be taken out on an accelerated or non-accelerated (standalone) basis. The probability of being disabled after age 60 is much larger than for younger ages. Therefore there is a significant loss in cover due to tapering. 1. Core Capital Disability Benefit: Pays 100% upon being totally and permanently unable to perform duties of nominated occupation due to sickness, disease, illness or injury (Category D) or 100% upon medical impairment meeting objectively defined medical criteria under Category A (i.e. only pays for events that meet the 100% severity level criteria). 1. Disability for regular occupation: Pays 100% on the following: Total, permanent and irrecoverable loss of: vision in two eyes, or use of two hands, or use of two feet, or use of one hand and one foot. Functional impairment, such that insured is totally, permanently and continuously: unable to take care of body or personal interests, or unable to engage in the occupational demands the insured was engaged in immediately before the functional impairment. Benefit tapers by 20% per annum from age 60. May also be taken without tapering, subject to a loading on the normal rates. Back and mental disorder exclusions apply. May also be taken without these exclusions, subject to a loading on the normal rates. The probability of a claim arising from a loss of two eyes, two hands, two feet or a combination thereof is minimal, relative to all other causes of disability. The definition of regular occupation is similar to an own occupation definition. Products that primarily use the occupational disability definition have a subjective claims assessment, which creates uncertainty for policyholders. As this Sanlam benefit does not cover partial disability, it must be compared to Discovery s Core Capital Disability Benefit. Discovery s Core benefit covers nominated occupation, but in addition uses objective medical criteria spanning all body systems in the assessment of a claim. 2. Disability for regular or any reasonable alternative occupation: Same as above, except occupational definition is as follows: Unable to engage in the occupational demands the insured was engaged in immediately before the functional impairment, as well as an occupation Sanlam may reasonably expect him to engage in, taking into account his education, training and experience. Benefit tapers by 20% per annum from age 60. May also be taken without tapering, subject to a loading on the normal rates. The definition of reasonable occupation on the Sanlam product is subjective, vague and creates even more uncertainty than the regular occupation definition. 14

15 3. Functional Impairment Benefit Pays 25% - 100% (depending on severity) upon meeting the requirements of one of the defined functional impairment claim events. 30-day survival period without life support See examples below where the payouts under the Functional Impairment Benefit are a poor proxy for the policyholder s loss of earning ability. The functional impairment must be permanent after the life insured has undergone optimal, reasonable treatment. This term is not well defined leaving significant subjectivity in the claims process. Imposing a 30 day survival period results in less claims being paid. For example, over 25% of heart attack victims die within the survival period required. This waiting period is relevant for standalone benefits where a substantial percentage of claims will not get paid. 2. Comprehensive Plus Capital Disability Benefit: Pays 100% upon being totally and permanently unable to perform the duties of nominated occupation due to sickness, disease, illness or injury (Category D) or 100% or 50% (depending on severity) upon medical impairment meeting objectively defined medical criteria under Category A & B severity level criteria respectively. or 2.5% every four months if 80%-100% of income is lost over previous four months (Category C). If this loss of income lasts 24 months, a 50% claim is paid. If it lasts 36 months, a 100% claim is paid. Not available on the Essential LIFE PLAN. 4. Functional Impairment plus Disability for regular occupation Pays 100% upon being totally and permanently unable to engage in the occupational demands the insured was engaged in immediately before the functional impairment or 25% - 100% (depending on severity) upon meeting the requirements of one of the defined functional impairment claim events. Benefit tapers by 20% per annum from age 60 for claims submitted under the occupational disability underpin. May also be taken without tapering, subject to a loading on the normal rates. 30-day survival period without life support Back and mental disorder exclusions apply on the occupational underpin. 5. Functional Impairment plus Disability for regular and reasonable alternative occupation Same as above, except occupational definition is as follows: Unable to engage in the occupational demands the insured was engaged in immediately before the functional Both benefits assess disability in terms of ability to perform occupation and medical criteria. Unlike the Sanlam benefit, Discovery s benefit covers temporary disability through a unique loss of income underpin has no exclusions for back and mental disorders does not taper offers cover up to age 70 offers reinstatement of cover through the Minimum Protected Fund converts to severe illness cover for whole of life at benefit expiry, free of medical underwriting. See comments below for more detail. 15

16 3. LifeTime Capital Disability Benefit: Pays 100% upon being totally and permanently unable to perform duties of nominated occupation due to sickness, disease, illness or injury (Category D) or 100% upon medical impairment meeting objectively defined medical criteria under Category A (i.e., pays for events that meet the 100% severity level criteria) The LifeTime Impact Booster depends on the LifeTime Impact Category of the disability and the salary growth option selected the Booster ranges from 100% to 200% Category D claims are assessed to be LifeTime Impact Category 3. The LifeTime Impact score, which determines the LifeTime Impact Category of the disability, is dependent on the following: - Age at disability and life expectancy thereafter; - Invasiveness of any surgery required; - Impact of any pharmacological treatment and its associated side-effects; - Impact of any therapy and rehabilitation required and its associated discomfort; - Impact of any assisted care and devices The LifeTime Impact Booster is applicable to category A and D claims. 4. LifeTime PLUS Capital Disability Benefit: Pays 100% upon being totally and permanently unable to perform the duties of nominated occupation due to sickness, disease, illness or injury (Category D) or 50% or 100% (depending on severity) upon medical impairment meeting objectively defined medical criteria under Category A & B severity level criteria or impairment, as well as an occupation Sanlam may reasonably expect him to engage in, taking into account his education, training and experience. No equivalent benefit No equivalent benefit Sanlam does not offer a benefit that considers the long-term impact of a disability on a person s ability to generate an income. Discovery s LifeTime benefits consider the long-term impact of a disability as well as the future expected salary growth of the claimant and boosts the Capital Disability payout accordingly. With the LifeTime Capital Disability Benefit, it is possible to get paid 200% of the sum assured. Sanlam does not offer a payout greater than the sum assured. Sanlam does not offer a benefit that considers the long-term impact of a disability on a person s ability to generate an income. Discovery s LifeTime benefits consider the long-term impact of a disability as well as the future expected salary growth of the claimant and boosts the Capital Disability payout accordingly. With the LifeTime PLUS Capital Disability Benefit, it is possible to get paid 200% of the sum assured. Sanlam 16

17 Vitality Status 2.5% every four months if 80%-100% of income is lost over previous four months (Category C). If this loss of income lasts 24 months, a 50% claim is paid. If it lasts 36 months, a 100% claim is paid. Not available on the Essential LIFE PLAN. The LifeTime Impact Booster depends on the LifeTime Impact Category of the disability and the salary growth option selected the Booster ranges from 105% to 200% Category D claims are assessed to be LifeTime Impact Category 3. The LifeTime Impact Booster is only applicable to categories A, B and D The LifeTime Impact score, which determines the LifeTime Impact Category of the disability, is dependent on the following: - Age at disability and life expectancy thereafter; - Invasiveness of any surgery required; - Impact of any pharmacological treatment and its associated side-effects; - Impact of any therapy and rehabilitation required and its associated discomfort; - Impact of any assisted care and devices does not offer a payout greater than the sum assure Dynamic Spend Protector (Not available on the Essential LIFE PLAN.) All disability products include the Dynamic Spend Protector at no extra charge. This benefit enhances the DiscoveryCard and DiscoveryMotor Card cashbacks (depending on the policyholder s Vitality status at the time of the claim event) by multiplying the total DiscoveryCard partner spend and DiscoveryMotor card spend by a Booster percentage taken from the following table: Claim category: A & D B Blue 10% 5% Bronze 15% 7.5% Silver 25% 15% Gold 35% 25% Diamond 50% 35% Term Up to selected 10 benefit expiry years age Note: these payments are in addition to the DiscoveryCard cashbacks & discounts at partner stores. No equivalent benefit Discovery is able to combine its existing Card & Vitality infrastructure to offer further cash backs and discounts at partner stores during disability. These savings can free up substantial cash flow during disability, and will place less reliance on drawing down using your lump-sum payment. 17

18 Discovery has no general medical exclusions Payouts under medical criteria reflected in Appendix 2 Sanlam excludes the following as causes of claim: Depression or dysthymia Post-traumatic stress disorder Fibromyalgia Chronic Fatigue Syndrome Back conditions, unless they qualify as: paraplegia quadriplegia malignant tumors of the spinal cord and vertebral column failed back syndrome after multiple spinal surgeries provided the extent of the functional impairment is verified by a specialist appointed by Sanlam. An injury or illness that directly or indirectly resulted from any of the above A complication directly or indirectly resulting from the above A side-effect of treatment for any of the above. Policyholders may take the Disability for regular occupation and Disability for regular or any reasonably alternative occupation benefit without the back and mental exclusions at a higher price. A claim will be refused if the disability can be substantially removed by surgery or other reasonable medical treatment, which Sanlam can reasonably expect the policyholder to undergo, taking into account the risks involved and the chances of success of such surgery or treatment. Payouts under functional impairment definitions reflected in Appendix 2 Exclusions Mental and back disorders account for approximately 40% of all disability claims and are regarded as the fastest growing cause of disability claim worldwide. Sanlam s exclusions for these conditions leave policyholders significantly exposed. Policyholders may take the Disability for regular occupation and Disability for regular or any reasonably alternative occupation benefit without the back and mental exclusions, subject to a loading on the normal rates. Premiums can be expected to increase 40% by removing the back and mental exclusions. (Based on R1 million cover, male, nonsmoker, age 45) On the Functional Impairment plus Disability benefits, the exclusions apply on the occupational underpin with no option to take the benefit without the exclusions Discovery Life covers pilots, unlike Sanlam. Discovery Life pays disability claims should the policyholder satisfy the claims criteria published in the policy document. We do not make this contingent on whether the disability can be removed by surgery or other reasonable treatment as is the case with Sanlam. Medical criteria There are several scenarios where the payouts under the Functional Impairment Benefit are unrelated to the financial liability that the policyholder has. For example: There is no payout for severe cognitive impairment Only 50% is paid for severe dementia, Only 50% is paid for malignant tumours in the spinal cord permanent assistance with all Activities of Daily Living would only qualify for 50% under the nervous system, permanent confinement to bed would only qualify for 75% under the nervous system. Inability to swallow without choking and suctioning only qualifies for 75% Inability to control eyelid closure only qualifies for 50% 18

19 Consider how back and mental disorders, which account for approximately half of all disability claims, are covered by Discovery and Sanlam. Sanlam s Functional Impairment Benefit provides a maximum of 25% payouts per region of the spine (cervical, thoracic and lumbosacral). Discovery covers each region at 50% to 100%. Sanlam does not cover partial mental disorders and in fact only covers certifiable mental conditions that result in permanent institutionalisation. Discovery covers mental disorders at 50% and 100%. Discovery s assessment includes a loss of income underpin to assess claims where it is difficult to establish permanence, such as back and mental disorders. Discovery has a sophisticated Activities of Daily Living (ADL) assessment to cater for subjective claims. ADLs such as communication, sensory functions, social interaction and stress adaptation are particularly suitable in assessing mental disorders. On the Functional Impairment plus Disability benefit, back and mental disorder exclusions apply on the occupational underpin with no option to take the benefit without the exclusions. The policyholder therefore has to rely on the Functional Impairment definitions, which may lead to inadequate or no payouts, as indicated above. It is unclear how Functional Impairment would deal with cancer. Essentially cancer would only be admitted for a claim once maximal medical improvement has been reached. This definition may exclude many Stage IV cancer claims. For example, stage IV breast cancer where a mastectomy is performed and chemotherapy or radiotherapy is undertaken. This would not fall under any of the body systems detailed by Sanlam, and it is unclear whether maximal medical improvement has been reached. 19

20 No general waiting or survival period Discovery s assessment includes a loss-ofincome underpin (Category C) which pays as follows: 2.5% every four months if 80%-100% of income is lost over previous four months (Category C). If this loss of income lasts 24 months, a 50% claim is paid. If it lasts 36 months, a 100% claim is paid. Maximum expiry age of 65 or 70. After expiry age, cover converts to Severe Illness Benefit for whole of life, free of medical underwriting No reduction of benefit until benefit expiry age i.e. no taper of benefit 30-day survival period on the Functional Impairment, Functional Impairment plus Disability and Physical Impairment benefits No equivalent benefit Maximum expiry age 65 (except the Physical Impairment Benefit, which can be taken for whole of life as well) The following taper applies to the Disability for regular occupation and Disability for regular or any reasonable alternative benefits: If a claim is admitted during any of the four How soon can a payout be expected? Choosing Sanlam s top-of-the-range benefit (Functional Impairment plus Disability) results in a 30-day survival period (without life support) being imposed on the policyholder. The Disability for regular occupation and Disability for regular or any reasonable alternative occupation does not have a survival period. By including a loss-of-income underpin in the assessment, Discovery can pay out claims long before Sanlam in cases where permanence is not yet established. This underpin is objectively defined as a proxy for occupation and combines shortterm and long-term disability under one product. The loss-of-income underpin also caters for illnesses which cause a low level of impairment yet a high loss of income. If loss of income persists, the four-monthly 2.5% payouts are first upgraded to 50% and then to 100% over a three-year period, despite the policyholder never qualifying under any capital disability benefit. One in 10 of our Capital Disability claims have qualified under Category C. Examples include: knee replacement; multiple fractures (MVA), gunshot (nerve graft left foot), broken pelvis (quad bike) and bowel resection (complications). Some policyholders made a full recovery, while others got 50% and 100% payouts when permanence was established. Duration of cover Discovery allows people to be covered until age 70, as it is evident that self-employed people are finding it more difficult to retire at age 65. At benefit expiry, Discovery s benefit converts to severe illness cover for whole of life, free of medical underwriting. Benefit tapering Selecting a non-tapering benefit with Sanlam is available, but increases the premium by approximately 5.5%. (Based on 1 million cover, male, non- 20

21 Lump sum disability benefits are not aggregated at claims stage. policy years before the policy anniversary before the life insured s 65th birthday, Sanlam will pay only a percentage of the cover amount as set out below. After payment is made, the benefit will end. Policy year that begins on the policy anniversary before or on the life % of cover amount assureds 61 st birthday 80% 62 nd birthday 60% 63 rd birthday 40% 64 th birthday 20% For the Functional Impairment plus Disability benefits, the benefits taper as above for a claim under the occupational definition. There is no taper on the Functional Impairment Benefit Future cover increases continue once the taper commences. A no taper option is available for business insurance at a higher premium. Sanlam may reduce the payout if the life is overinsured; taking all the insured s disability benefits with Sanlam and other life companies into account. The sum total of all the following benefits are taken into account when the permissible maximum amount for disability benefits is determined; Functional impairment plus disability benefits (Sanlam and all other insurers) Physical impairment (Sanlam) Functional impairment (Sanlam) and Disability benefits (lump sum, income benefits and waiver of payment) Sanlam and all other insurers Sickness benefits (Sanlam and all other insurers) The cover amount will not be reduced if the claim is as a result of any of the following: Total, permanent and irrecoverable loss of: vision in two eyes, or use of two hands, or smoker, age 45) The Sanlam benefits taper at a time when the incidence of disability is highest: a 60- year old is 15.5 times more likely to become disabled in the next five years than a 35- year old. Because the benefit tapers, policyholders will on average only get half their sum assured after age 60. The philosophy behind a tapered benefit is that as an individual gets older, he needs less cover as there are fewer future years income to replace should he become disabled. Discovery believes that when taking out a policy, individuals may be unsure of their future liabilities close to retirement and that they need adequate cover for all possible future contingencies. In addition, many people are under-funded for retirement and, with decreased earnings as a result of a disability, it becomes even more difficult to maintain your retirement funding programme. Tapered benefits are particularly inappropriate for buy-and-sell agreements where it is uncertain whether the tapered sum assured will be sufficient to buy out the partner s equity. Aggregation Unlike Sanlam, Discovery does not aggregate lump sum disability payouts. 21

22 use of two feet, or use of one hand and one foot. Functional impairment, so that insured is totally, permanently and continuously unable to take care of bodily or personal interests. 6. Physical Impairment Benefit: Pays 10% - 100% (depending on severity) upon meeting the requirements of one of the defined physical impairment claim events. This benefit covers loss of function of limb(s), amputations of limb(s), loss of hearing, vision or speech, confinement to a bed or wheelchair and third degree burns. Benefit term can be to age 65 or whole of life. This benefit covers a very small subset of causes of disability and does not cover the chronic illnesses at all. The payouts do not match the financial need covered by disability benefits. For example, a surgeon losing three fingers plus thumb would qualify for a maximum payout of 30% of R2.5 million, whereas a full disability product would have paid 100%. The maximum cover is R 2.5 million and forms part of the maximum disability cover of R12 million allowed by Sanlam at new business stage. There is a 30-day survival period without life support required to receive a payment. There is a six-month survival period if confined to a bed or wheelchair due to cancer. It is difficult to see how it is in the policyholder s best interests that a longer survival period applies for cancer as opposed to all other disease processes. 22