South African life insurers disbursed R298 billion in claims and benefits to beneficiaries and policyholders during the first six months of 2024, according to data released by the Association for Savings and Investment South Africa (ASISA). The payouts were made across a range of policy types, including retirement annuities, endowment policies, life, disability, critical illness, and income protection policies.
Gareth Friedlander, a member of ASISA’s Life and Risk Board Committee, explained that the payouts would have followed significant life events such as death, disability, or retirement. Despite the substantial outflows, the life insurance sector remained robust, with life insurers holding assets of R4.3 trillion by the end of June 2024, against liabilities of R3.9 trillion. The industry’s free assets of R377 billion exceeded the regulatory Solvency Capital Requirement (SCR), set by the South African Reserve Bank’s Prudential Authority, providing a solid buffer for policyholders.
“The life industry has maintained resilient capital strength, even through the Covid-19 pandemic, ensuring it is well-positioned to meet claims and policy benefits during challenging times,” Friedlander stated.
Risk Policies and Underinsurance
As of June 2024, South African life insurers managed 35.2 million risk policies, covering life, disability, severe illness, and income protection. Funeral policies accounted for 15 million of these, with over 7 million credit life policies and nearly 13 million life-related risk policies. The ASISA statistics revealed a modest 1.7% growth in recurring premium risk policies during the first half of the year, despite economic challenges, including a 33.5% unemployment rate and rising living costs.
Friedlander emphasized that any increase in life and disability policies was positive, considering the significant underinsurance issue in South Africa. ASISA’s 2022 Life and Disability Insurance Gap Study showed that most South African households only had enough insurance to cover 45% of their needs, potentially forcing drastic lifestyle changes in the event of an income earner’s death or disability.
Lapses and Surrenders
However, 4.3 million recurring premium risk policies lapsed in the first six months of 2024, leaving policyholders and beneficiaries without or with reduced cover. Additionally, 287,707 savings policies were surrendered, despite the introduction of nearly 300,000 new savings policies during the same period. These surrenders often occur due to financial strain, as consumers withdraw their savings prematurely to meet immediate expenses.
Friedlander expressed concern about the lapses, noting that policyholders often overlook the potential difficulty of regaining risk cover due to age or health issues and may face higher premiums if they seek to reinstate coverage later.
Outlook for Policyholders
Despite the financial pressures facing consumers, Friedlander remains cautiously optimistic. He pointed to a strengthening Rand, which could alleviate fuel costs, and a recent 0.25% interest rate cut, which may provide relief for indebted households. He also noted a more optimistic national sentiment following the peaceful transition to a Government of National Unity after the elections and the easing of load-shedding.
ASISA encourages consumers facing financial difficulties to seek assistance through tools such as the Financial Health Check, Budget Planner, and Debt Repayment Calculator on the Smart About Money platform, which is designed to help individuals manage their finances effectively.
