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What motivates South Africans to take out life insurance cover? Gauging from recent years, a crisis that impacts people’s lives and livelihoods can certainly catapult people into action, but it appears that affordability remains a strong drawback.
What is South Africa’s life insurance market penetration?
“The latest Outlook Study from the Financial Sector Conduct Authority (FSCA) shows that the majority of South Africans still do not have a life insurance policy in place. The report shows us that currently only about 10% of South Africans have life cover,” says Discovery Life Deputy Chief Executive, Gareth Friedlander.
According to the report, South Africans without non-funeral cover ‘cite affordability as the key barrier to taking up an insurance product’.
South Africans are severely underinsured
“As at December 2021, according to ASISA (the Association for Savings and Investment South Africa), the average South African income earner has a life cover gap of a minimum of R1 million and a disability cover gap of at least R1.4 million,” says Friedlander. “This same study also shows that earning South Africans only have enough life and disability cover for around 45% of their total insurance needs. This has direct implications on households with family members depending on one earning individual,” he adds.
According to ASISA’s 2021 study, South Africa’s gap is around R34.3 trillion and exceeds the National Budget by at least 15 times.
“Sufficient insurance is crucial and can be used to cover immediate household expenses – like food, transport and municipal account costs, education needs for children, funeral and medical costs, or even adapting a home or vehicle for the needs of specific disabilities,” explains Friedlander.
Closing the gap with comprehensive cover versus the cost of a life-changing event
The reality is that the cost of a life-changing event can be crippling. “Trying to manage such costs can be a major burden but life insurance provides the financial support that you aren’t likely to have otherwise,” adds Friedlander.
“Actuarial statistics show that more than 500 families, regardless of age or income group, are likely to experience a death or disability event on any given day.”
According to ASISA, at least 8 million South African income earners are younger than 40 years of age, and most of these individuals are underinsured. “Realistically, younger earners and their families will need to rely on insurance payouts for longer in the event of a death, severe illness or disability than older age groups who are closer to retirement age,” adds Friedlander. “So, insurance needs are, in many respects, higher for younger earners than older individuals. However, the gap is widest at younger ages.”
“The good news is that funding life insurance cover from a younger age is the cheapest option, which means it is easiest to narrow the insurance gap in this segment.”
However, a small percentage of allocated income is difficult for many to achieve during these times as we all must absorb rising fuel costs, increasing food prices and interest rates, and managing debt. “It’s understandably difficult to commit to monthly life cover premiums when living costs are so high,” says Friedlander.
What can South Africans do today to better safeguard their tomorrow?
“When you consider all the challenging factors affecting affordability and policy take up, it makes sense to go with an insurer that covers multiple bases,” says Friedlander. “With Discovery Life, clients have access to cover that protects their children’s education, as well as severe illness and disability needs with unique features, such as funding for assistive medical devices and international medical treatment options.”
“We’re not just about protecting clients against risks, we’re also all about preventing them as much as possible. And when you’re leading a healthier lifestyle, the surplus we accumulate through lower claims payouts can be returned through mechanisms such as premium discounts and premium PayBack. Our Shared-value model affords clients the opportunity to take control of their own quality of life,” he adds.
“With Discovery Life’s policies and benefits, clients can protect their future lifestyles by making prudent decisions today. It also gives you every opportunity to maximise value on your policy today, tomorrow, and well into the future,” he concludes.
Learn more about Discovery Life’s award-winning and holistic suite of cover benefits here or chat to a financial adviser today.
Discovery. The Future of Life Insurance. Now.
Discovery Life Limited, registration number 1966/003901/06, is a licensed life insurer, and an authorised financial services and registered credit provider, NCR registration number NCRCP3555. Product rules, terms and conditions apply.
This post and content is sponsored, written and produced by Discovery Life.
