South Africa has seen an increase in financially distressed consumers cashing out their savings/investments and surrendering their insurance policies to survive, as they feel the sting of the country’s sharp economic slowdown, according to the Association for Savings and Investment South Africa (Asisa).
Hennie de Villiers, deputy chair of the Asisa Life and Risk Board Committee, said this is evidence that South African consumers are facing “unprecedented hardship”.
On Wednesday, Asisa released its long-term insurance statistics, showing that one million more recurring premium policies lapsed during the course of 2022, compared with 2021.
In total, 8.4 million policies lapsed, which occurs when a policyholder stops paying premiums for a risk policy with no fund value, Asisa said.
“On the other hand, almost 1.2 million fewer recurring premium policies were sold in 2022 than in 2021, further demonstrating the financial pressure experienced by consumers,” De Villiers.
In 2022, South Africa’s economy grew by a lower-than-expected 2% and contracted by a massive 1.3% in the last quarter, spelling trouble for already-low levels of employment and putting pressure on household disposable income. The ripple effect is being seen in consumers’ waning ability to spend on savings and insurance products.
The statistics found that 689 888 recurring and single-premium savings policies were surrendered during the course of 2022, and although this was below 2021 levels, when 938 148 savings policies were surrendered, De Villiers said it’s still concerning,
When a client surrenders a policy, they withdraw the fund value before their savings policy reaches maturation.
Despite consumers’ financial hardships, the life insurance industry in South Africa ended the year with assets worth R3.7 trillion and liabilities of R3.4 trillion – similar to 2021 – and remains well capitalised, Asisa said.
The industry paid out R578 billion to policyholders and beneficiaries during the reporting period, which was the second-highest amount paid in a year, Asisa said.
The payments were related to claims against life, disability, critical illness and income protection policies, as well as retirement annuity and endowment policy benefits.
The total amount paid out was also lower than in 2021, when the industry spent R608 billion, largely as a result of Covid-19 death claims. As many as 501 785 death claims were paid last year, down 26% from the previous year, it said.
However, Asisa warned: “Statistics show that the impact of Covid is likely still a threat and is still costing lives.”
This story first appeared in Moneyweb.co.za and is republished with permission.
