The Association for Savings and Investment South Africa (ASISA) recently published their life and disability insurance gap statistics which highlighted that individuals are unable to fully cover themselves or their dependents in the event of death or disability. The insurance gap is defined as the difference between actual risk cover in place and the insurance need of South Africa’s earners and their families. The insurance need takes into account the amount needed to cover a household’s financial requirements in the unfortunate event that death or disability occurs.
The table above, which illustrates the life and disability insurance gap per age group on the 31 December 2021, depicted an interesting overview of the overall market/industry. Income earners in Limpopo were shown to have the lowest life and disability cover adequacy (actual cover versus the insurance need) of 26% and 32% respectively. The highest cover adequacy in place stemmed from the Western Cape with 56% of adequacy for life cover and 54% for disability cover. South Africa’s 14.3 million income-earning population is approximately 58% male and 42% female. The life and disability insurance gap is slightly lower for women whilst income earners with tertiary qualifications were shown on average to have a higher cover adequacy in place. The 2022 ASISA Insurance Gap Study shows that degreed earners have provided for at least 76% of their life cover needs and 58% of their disability cover requirements. The life insurance gap is the biggest for earners who have not completed school. However, many of these earners would have at least 50% of their disability cover needs provided for, largely due to government disability grants.
The findings of the ASISA Life and Disability Insurance Gap Study show that income earners under the age of 30 are most likely to face a substantial life and disability shortfall, followed by earners between the ages of 30 to 39. Since eight million of South Africa’s 14.3 million earners are younger than 40 years, the majority of the country’s earners are likely to be significantly underinsured.
Earners younger than 30 face an average insurance shortfall of R1.6 million for life cover and R1.7 million for disability. Earners between the ages of 30- and 39-years face life insurance shortfalls of R1.4 million per earner and R1.8 million for disability.
The insurance gap narrows substantially for earners above the age of 50 years. Older earners are likely to have more life cover than needed, while the disability insurance gap is greatly reduced. This is because the study assumes that the insurance need exists only until retirement age since provision for income in retirement should be covered by retirement savings, rather than risk insurance.
FSPs are urged to consider the current statistics around the Life and Disability Insurance space as trends and needs of the industry, which provides valuable insight to inform future business planning.