A staggering 8.4 million insurance policies lapsed last year, and consumers withdrew almost 700 000 savings policies early.
The statistics in the Savings Association of South Africa’s (Asisa) latest claims report show that South African consumers are struggling to pay for their insurance policies and are dipping into past savings to make ends meet. Conditions became tougher for consumers generally in 2022, given a surge in inflation and resultant jump in interest rates.
Asisa said on Wednesday the 8.4 million recurring premium policies that lapsed in 2022 were one million more than in 2021. Some of the insurers that reported their 2022 financial results this month said they were threading cautiously because of the rising consumer strain that they observed, especially in the second half of 2022. The interest rates had risen by an additional 225 basis points from the first half, but food inflation continued apace.
Hennie de Villiers, deputy chair of the Asisa Life and Risk Board Committee, said it’s clear that De Villiers says that South African consumers faced unprecedented hardships. For many, there seemed to be one choice to stop risk insurance premiums and cash out investment policies to survive.
De Villiers said the temptation to let go of life insurance policies could be overwhelming when people are struggling to make ends meet. But he cautioned that this is an irreversible mistake.
“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,” said De Villiers.
On the savings front, Asisa said that consumers surrendered 689 888 recurring and single premium policies in 2022. They withdrew the funds before their policies matured. While this number was lower than the 938 148 recorded in 2021, De Villiers said it is still concerningly high.
Insurance claims are near record highs
De Villiers said consumers should think carefully before giving up their insurance policies, given that the insurance industry is seeing a rising burden of diseases in SA after the pandemic.
Doctors are making more late-stage cancer diagnoses, which are costlier to insurers and medical aids, without yielding better health results for the policyholders.
Asisa statistics show that local life insurers paid R578 billion in claims to policyholders in 2022, the second highest paid in a year. The highest value of claims paid was R608 billion in 2021, primarily because of Covid-19-related deaths. Although the 2022 claims were lower than in 2021, they were still 24% higher than in 2019.
De Villiers said these statistics show that the impact of Covid-19 is likely still a threat and is still costing lives.