Insurers are being forced to deal with South Africa’s high murder rate

Opening the door to new policies.
Opening the door to new policies.
Image: Reuters/Pool/Antoine de Ras
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One of South Africa’s major life insurance companies has been forced to change its payout policy for deaths due to violent crime this week, a move that could have significant ramifications for one of the country’s most profitable sectors.

Momentum submitted to public pressure this week to pay a widow whose husband was gunned down in a carjacking. Insurers from the company initially refused to pay out 2.4 million rand ($170,304) on his death, arguing that his blood sugar levels at the time of his death indicated diabetes, which it said he had not disclosed to the insurer at when he took out the policy.

Nathan Ganas was shot and killed in his driveway in the coastal city of Durban in 2014. His wife Denise Ganas said he died trying to protect her from an assault-weapon attack. Their daughter, who was ten years old at the time, was also injured as bullets shot through the front of their home.

Momentum, , one of the South Africa’s largest longterm insurers, said Ganas had “not acted in good faith” when he failed to disclose that he had a pre-existing condition, which would have affected their decision to cover him. His wife said he had never been treated for the disease. She took the matter to the insurance ombudsman, who sided with Momentum‘s undisclosed condition argument. Momentum also asked Ganas to pay back the 50,000 rand ($3,548) payout she was given for funeral costs.

After news of the ruling became public, the resulting outcry left Momentum looking callous, and prompted South Africans to scrutinize their insurance policies. It didn’t help that the CEO of Momentum’s parent company MMI Holdings, Hillie Meyer, lost his cool in a radio interview, arguing that paying the Ganas’ claim would encourage non-disclosure in other clients.

Late on Tuesday (Nov. 20), Momentum capitulated. They agreed to pay the Ganas family and, in “a solution for the victims of violent crime,” announced that it will now pay out benefits in violent crime-related deaths, “regardless of previous medical history.”

The new policy was welcomed by some, and is likely to force the entire industry to reassess their processes. This could also lead to an increase in payouts, something insurers all over the world try to avoid, even if their marketing says otherwise. By Wednesday (Nov. 21), even the the long term insurance ombud had an about-turn, telling a local news channel that the Momentum case showed it was time to change the country’s insurance laws.

The financial services sector, where insurers are big industry players, is one of the few drivers of growth in South Africa’s flailing economy. In a country with an average daily murder rate of 56 people, the Momentum controversy forces an industry that has prided itself maintaining international standards to deal with the realities on the ground.

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