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South Africa Rethinks

Life insurers are helping to change perceptions about AIDS

The Economist
November 9, 2006

Diagnosed with HIV 23 years ago, David Patient thought he would never see the day when he could insure his life. Until the launch late last year of AllLife, an innovative insurance newcomer, the few life insurers taking on clients with HIV offered very limited cover and charged prohibitive premiums. But AllLife is specifically targeting customers carrying the virus, offering them more affordable insurance for up to 3m rand ($410,000). They are now able to protect their loved ones and get mortgages. This is changing perceptions of a disease often considered to be a death sentence.

The average probability of AIDS death in South Africa would appear to make life cover prohibitively costly for people with HIV. But extremes rather than averages apply to HIV/AIDS: people who monitor their health and are treated tend to do well; most of the rest die quickly when AIDS sets in. The first group’s risk profile is no worse than diabetics’, according to AllLife. To maintain their cover, clients have to go for regular blood tests and take antiretroviral medication when needed. AllLife sends reminders for tests and monitors results. This helps clients to stay alive—and AllLife to keep risks down. Although its cover costs two to five times more than standard life insurance, it is much cheaper than what was available before.

With 5.5m people thought to carry the virus, South Africa is in some respects very innovative. AllLife runs ahead of the pack, but at least the rest of the industry no longer refuses to pay for customers who tested negative for HIV when getting cover, but later die from AIDS. AllLife receives applications from around the world, including America, Japan and Europe. It only covers South African residents now, but is planning to expand into neighbouring Namibia next year.

After dragging its feet, South Africa’s government has now rolled out treatment for AIDS, and about 250,000 people are receiving antiretrovirals from the public and private sectors combined. This falls short of the 800,000 or so AIDS sufferers thought to need drugs, however. For many insurers, the risk remains too unpredictable and the number of people who can afford insurance too small. But AllLife believes the size of its potential market to be 2m people—that’s the number of HIV-positive South Africans earning more than a modest 2,500 rand a month. So far half of its clients earn much more than that. Less than a year after it was launched customers are only in the hundreds. This is ahead of projections, but the company will need many more to be profitable. To expand distribution, it has recently hired brokers—who charge reduced commissions—and is considering mass advertising.

It is a tough challenge. Life insurance remains beyond the means of millions of South Africans—whether they carry the virus or not—and very few apply for cover. Many of those who discover they are HIV positive withdraw because of confidentiality fears. But according to the Life Offices Association, an insurance body, some established firms will soon come up with affordable products, too. It took decades before diabetics could insure their lives; let’s hope people with HIV do not need to wait much longer.

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