The Association for Savings and Investment South Africa (ASISA) has published an update of life insurance claims and benefits paid out for the first half of 2024. As per the statistics, insurers paid claims and benefits worth R298 billion. ASISA indicated that for the first six months of this year, despite the significant pay-out in claims, insurers remain well-capitalised and are in a stable position to honour their contractual obligations.
At the end of June 2024, insurers held assets of R4.3 trillion and liabilities amounted to R3.96 trillion, which resulted in free assets of 377 billion. This is more than twice the reserve buffer required by the Solvency Capital Requirements of the Prudential Authority.
The below table consists of the statistics for the period January 2024 to June 2024:
The life industry numbers
At the end of June 2024, South African life insurers held 35.2 million risk policies for policyholders paying monthly premiums. 15 million were funeral policies, just over 7 million were credit life policies, and nearly 13 million were life, disability, severe illness, and income protection policies.
The ASISA statistics show an average growth of 1.7% in recurring premium risk policies in the first six months of 2024. There were 4.3 million risk policies lapsed. The report proposes that the high lapse rate reflects the country’s economic situation and financial strain on clients due to the high interest rates, and the increase in food and fuel prices which have the unfortunate consequence of leaving more persons without risk cover, or with insufficient risk cover.
The 2022 ASISA Life and Disability Insurance Gap Study highlighted that South Africa’s 14.3 million income earners had only enough life and disability insurance to cover 45% of their households’ total insurance needs. Consequently, the average South African household, supported by at least one income earner, would need to drastically reduce living expenses if the earner were to die or become disabled without another source of income.
Further indicating the presence of financial pressure on clients who, in times of economic strain, are more likely to stop paying premiums and withdraw their funds before maturity is the report finding that in the first six months of 2024, there were 287 707 individual recurring premium savings policies surrendered (retirement annuities and endowments) and 294 138 new policies taken up.
In conclusion, the report expressed cautious optimism, suggesting that there is light at the end of the tunnel for consumers, encouraging policyholders to maintain their valuable insurance coverage if possible. Overall, a positive shift following the peaceful transition to a Government of National Unity after the elections and the suspension of load-shedding. A sustained recovery in the Rand’s strength could positively impact fuel prices and recent interest rate cut, although small, will hopefully be the first of many, potentially bringing relief to indebted consumers and stimulating economic growth.