South Africa’s big insurance problem

A new survey found that only 34% of South Africans surveyed had insurance products to adequately cover their financial risks, revealing potential vulnerabilities in times of unexpected hardship.

Sanlam launched its first Sanlam Financial Confidence Index today, an annual index which assesses the financial confidence levels of the country’s adult population. 

Sanlam’s study surveyed over 1,500 respondents, representing the adult South African population with a monthly income of R1,000 or more.

The survey focused on financial confidence and found that only 35% of South Africans trust their financial abilities.

It also revealed that only 42% of South Africans surveyed have insurance cover for estate duty in the event of their death.

Additionally, only 17% did not feel unhappy about their current financial state. Feelings of stress, hopelessness, and discomfort in various financial contexts were also common among respondents.

“These findings collectively emphasise the need for comprehensive financial education, guidance, and support systems across South Africa,” the survey said.

“As the country navigates an evolving economic landscape, empowering individuals with the skills and knowledge to make informed financial decisions becomes paramount.”

Sanlam’s findings align with The Association for Savings and Investment South Africa (ASISA), which released an update on the health of South Africa’s life insurance industry earlier this year. 

ASISA found that South Africans often abandon life cover during economic hardship.

Many South Africans stopped paying their premiums or withdrew their investments from life insurers in 2022 as the economic hardship they faced began to reflect in the data. 

South Africans surrendered 689,888 savings policies in 2022 as clients withdrew their funds before maturity, indicating a need to draw on savings to meet expenses. 

This is less than in 2019, with over 900,000 policies surrendered that year. 

The number is “still too high and therefore concerning”, according to the deputy chair of ASISA’s Life and Risk Board, Hennie de Villiers.

Shockingly, 8.4 million recurring premium policies lapsed in 2022, with policyholders no longer having the disposable income to contribute to their long-term insurance products. 

Further, insurers sold 1.2 million fewer recurring premium policies in 2022 than in 2021.