Bad news for people with insurance in South Africa

South Africans are expected to face rising insurance premiums in the coming months due to a weaker rand and increased costs resulting from tariffs imposed on global trade. 

This is feedback from Ryno de Kock, the head of distribution at PSG Insure, who outlined how geopolitical tensions and rand weakness can impact insurance policies. 

De Kock explained that, while much of the global focus is on the impact of tariffs on major economies, South Africa is not immune to this effect. 

Tariffs, even if not imposed directly on South Africa, have the potential to significantly impact economic growth and export earnings for local companies. 

In particular, tariffs from the United States on South Africa’s major trading partners – China and the European Union – are likely to impact demand for local exports. 

Apart from economic growth, increased global tension will put pressure on the rand as investors flock to safe-haven assets and move away from riskier emerging market assets. 

This has been coupled with domestic factors, such as instability within the Government of National Unity (GNU) and VAT hikes, which are likely to raise the cost of insurance. 

VAT hikes will directly increase the premiums South Africans pay for insurance, De Kock said. A weaker rand, on the other hand, will take time to filter through to monthly payments. 

Continued pressure on and depreciation of the rand fuel fears and add financial strain to a struggling economy, which already needs to deal with successive VAT increases over the next two years. 

These developments have an impact on all business sectors, including the insurance industry, and will filter through to consumers, De Kock explained. 

Most consumer goods in South Africa – including cars, electronic devices and household appliances – are imported. 

“A weaker rand means that all these items cost more, which in turn means that their replacement values increase,” De Kock said. 

“Insurance companies are likely to experience higher claim values as the rand depreciates and may, in time, have to increase insurance premiums to cover these.”

De Kock gave a simple example of how a 10% decrease in the rand could affect your insurance in the coming months and years. 

If the estimated value of the home electronics included in your home contents insurance is around R200,000, but would now cost R220,000 to replace. 

“Global development aside, your home or business still has the same risks it did before. But the consequences of a loss inadequately covered by your policy will be more severe now,” De Kock said.  

“As the replacement costs of goods increase, it becomes more difficult – and in many cases impossible – to cover shortfalls out of your own pocket.”

Bad news for overseas travellers

Standard Bank Insurance recently warned South Africans of the impact of a weaker rand on insurance claims from medical emergencies experienced overseas. 

It said that some of these claims run into the millions of rands and have the potential to cripple families financially who do not have adequate insurance. 

While many travellers have insurance for these emergencies, the rand’s recent volatility has greatly increased the cost of any claims.

Nadia Reddy, Head of Short-Term Products at Standard Bank Insurance, explained that a weaker rand against stronger currencies, such as the dollar and pound, can compound the financial strain faced by South African travellers.

When combined with the global average medical inflation rate, which is predicted to remain above 10%, the risks of travelling uninsured are more significant than ever.

“The volatile rand exchange rate means that costs abroad, especially in countries with stronger currencies, become exorbitant,” Reddy explained.

“Medical treatments, emergency care, and hospitalisation in places like the US, UK, Canada, or Australia can quickly rack up bills into the millions.” 

Without insurance, South African travellers may be faced with crippling financial burdens, often wiping out savings or accumulating debt to cover these unforeseen costs.

The medical costs are also compounded by the cost to repatriate an individual if the medical condition requires it.

The travel claims cases brought forward by clients of the broker business paint a stark picture of the financial burden associated with medical emergencies. 

For example, a 66-year-old travelled to Mauritius and needed extensive medical treatment for pneumonia and air ambulance repatriation, costing over R741,000.

Similarly, a 69-year-old cyclist who travelled to the USA faced a staggering bill of R2.8 million after a fractured femur that led to further complications, including a pulmonary embolism. 

Other examples include an 83-year-old visiting Australia whose fall resulted in over R1.3 million in medical expenses. 

Another 63-year-old who travelled to Canada faced nearly R1.5 million in costs after treatment for a cerebral aneurysm.

These cases highlight the unpredictable nature of medical emergencies and the immense financial strain they can impose.