(4 minutes read)
· Some of South Africa’s insurers have stopped selling
retrenchment cover as the novel coronavirus threatens to accelerate
the rate of unemployment in the country
· Retrenchment covers are not widely available in South Africa
· The cover extended by these companies normally hedges
against a portion of employees salaries, usually up to 75% for six
months after involuntary retrenchment. Liberty confirmed that its
retrenchment cover is no longer open for new business since it cannot
assess the potential risks while extending the product
Some of South Africa’s insurers have stopped selling retrenchment
cover as the novel coronavirus threatens to accelerate the rate of
unemployment in the country. FMI – which is a sister concern of
Bidvest Life Limited – said that some of the industry players were no
longer accepting new applications for retrenchment cover. The other
day the South African Reserve Bank estimated that that the country
could lose about 370 000 jobs this year.
Retrenchment covers are not widely available in South Africa. Only
Liberty and Old Mutual offer the cover, among the five large insurance
companies. The cover extended by these companies normally hedges
against a portion of employees salaries, usually up to 75% for six
months after involuntary retrenchment. Liberty confirmed that its
retrenchment cover is no longer open for new business since it cannot
assess the potential risks while extending the product.
Banks provide cover to pay customers’ monthly debt installments in
the case of retrenchment. However, Absa, which also pays a limited
income benefit – only R5 000 for two months – said it is still
accepting new applications.
Some insurance companies, say FMI – is still offering retrenchment
cover to new customers, but only certain people would qualify for it,
such as full-time and permanently employed individuals who received a
salary for at least the past two years. But someone who changed jobs
recently and has not received salary for at least a year, are not
eligible. People working in mining, construction and fishing
industries are completely excluded.
The long and short of the story is that insurance companies in the
wake of Covid -19 and the situations that prevailed before that are
cagey about extending cover against retrenchments and when they
extend, it is with a lot of “ ifs and not’s”.
