In recent years, the life insurance market in South Africa has experienced significant transformation, driven by changing consumer preferences and increased financial pressures.
Mark Berrington, head of strategy and insight at Hollard Life Solutions, has highlighted and observed one notable surge within the sector – a demand for fully underwritten life policies.
He stated that the shift indicates that consumers have now begun to prioritize more extensive coverage to protect their families in the face of unexpected events, saying while the uptake of funeral cover has stabilised, the industry has seen an increase in the rate of lapsed or cancelled policies.
Berrington attributed this to consumers grappling with financial constraints brought about by uncertain economic climate.
The pandemic has also played a role in shaping consumer attitudes towards insurance.
Berrington said the heightened awareness of mortality and vulnerability due to failing health patterns has prompted individuals to include critical illness cover in their policies.
“Interest rates have increased consistently since November 2021, putting consumers under serious pressure,” said Berrington.
“They have had to prioritize what they spend their money on. This financial pressure is expected to continue for a while to come.”
According to the BankservAfrica Take-Home Pay Index, during the Covid-19 lockdown period, take-home pay levels declined progressively, and last year they returned to the 2019 levels.
Significantly, the index demonstrates that the take-home pay has remained between R12 000 and R13 150 since 2019, but the cost of living has substantially soared over the same period.
Said Berrington: “The Covid-19 pandemic brought home a changing headspace for the average consumer because mortality and death are far more real given the many fatalities over the period.
“Consumers find the critical illness cover option compelling, as part of a life cover package, or as a stand-alone policy.
“That indicates how people are taking their healthcare needs more seriously since the [onset of] the pandemic. This is why Hollard now offers the critical illness benefit to cater for the changing consumer needs.
“Also, with the emergent tighter family structures, more people take up family-related cover rather than stand-alone cover.”
However, said Berrington, the industry shifts have resulted in certain market segments experiencing lower new business volumes and higher policy lapses, leaving fewer individuals insured compared to previous years.
To address these challenges, he advised insurers to understand and effectively respond to evolving consumer needs.
In an environment characterized by high inflation and sustained high interest rates, the insurance sector must develop innovative solutions that strike a balance between affordability and comprehensive coverage.
This, said Berrington, would ensure that individuals have access to the financial protection they need during challenging times.
“Organisations need to understand and adapt to the changing world. This applies in the insurance sector too, where different solutions are required to meet changing consumer needs.
“The economic forecasts favour inflation and interest rates staying high for longer, meaning that consumer pressure is expected to be sustained for a while.”
Considering these changes, consumers seeking life cover should consider the following tips to navigate the process effectively:
- Assess your needs: evaluate your financial obligations to determine the appropriate coverage amount based on mortgage payments, outstanding debts, and dependents.
- Research different insurers: look for reputable insurance companies with strong financial stability, positive customer reviews, and a good claims settlement record.
- Obtain multiple quotes: collect quotes from several insurers to compare premiums and coverage options. Utilize online insurance comparison tools to streamline the process.
- Review policy terms and conditions: carefully read and understand the policy documents, paying attention to coverage exclusions, premium payment flexibility and policy renewal provisions.
- Understand policy types: familiarise yourself with different types of life cover and choose the one that aligns best with your needs and budget.
- Seek professional advice: consult an insurance adviser or financial planner for personalised guidance based on your circumstances.
- Evaluate add-on riders: assess the availability of additional riders that can enhance your policy’s coverage, such as critical illness riders or disability riders.
- Consider term length: opt for a shorter-term length if you have a tight budget, but ensure it adequately aligns with your financial obligations.
- Take advantage of discounts: enquire about any available discounts that insurers offer, such as lower premiums for non-smokers or policyholders with healthy lifestyles.
- Review and reassess periodically: regularly review your life cover to ensure it remains suitable for your needs, especially when significant life events occur.
It is crucial for consumers to prioritize the quality and reliability of the insurer when choosing life cover.
While cost is an important factor, making an informed decision that balances budgetary constraints with the necessary protection for loved ones is key.
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