Business Day

Con­sumers cash in sav­ings poli­cies to make ends meet

- HANNA ZIADY In­vest­ment Writer zi­adyh@bdlive.co.za Business · Finance · Personal Finance · Insurance · Society

CASH-strapped con­sumers are tap­ping into their long-term sav­ings to get by, sta­tis­tics from the As­so­ci­a­tion for Sav­ings and In­vest­ment SA (Asisa) show.

In the 12 months to June 2016, many pol­i­cy­hold­ers can­celled their sav­ings poli­cies to ac­cess much­needed cash, said Peter Dempsey, the deputy CEO of Asisa, the in­dus­try body for life in­sur­ers and as­set man­agers.

Ben­e­fits paid to in­di­vid­u­als who cashed in their sav­ings poli­cies in­creased 18% to R74.6bn, com­pared with a year ear­lier.

Life in­sur­ers paid out 20% more than the pre­vi­ous year, or R36.5bn, to ben­e­fi­cia­ries of life in­surance poli­cies, as well as to pol­i­cy­hold­ers with dis­abil­ity, in­come pro­tec­tion and/or dread dis­eases cover.

Dis­abil­ity claims in­crease dur­ing tough eco­nomic times, as con­sumers look for ways to ac­cess cash, some­times via fraud­u­lent claims. Cor­po­rates with group dis­abil­ity cover in place also see a spike in claims for stress-re­lated ail­ments, which pre­vent their em­ploy­ees from work­ing and thus trig­ger a dis­abil­ity pay­out or monthly pay­outs on an in­come pro­tec­tion pol­icy.

Next week, life in­sur­ers would share their fraud sta­tis­tics with Asisa, Dempsey said.

“I wouldn’t be sur­prised to see an in­crease in fraud­u­lent claims, given what we’ve ex­pe­ri­enced in pre­vi­ous years when the econ­omy has been slug­gish.”

As­sets held by life in­sur­ers — a func­tion both of in­flows and in­vest­ment re­turns — in­creased 5% to R2.6-tril­lion at the end of June, ex­ceed­ing li­a­bil­i­ties by more than four times the legally re­quired re­serve buf­fer.

New pre­mium in­come grew 14% to R148.8bn, with sin­glepremium in­vest­ments ac­count­ing for the bulk of this in­crease.

The ac­tual num­ber of poli­cies sold de­creased by 8%, driven mainly by a drop in new re­tire­ment an­nu­ity poli­cies. “This is to be ex­pected, given that con­sumers are un­der in­creas­ing fi­nan­cial pres­sure,” Dempsey said.

Re­cur­ring-pre­mium sav­ings busi­ness bucked this trend, grow­ing 33% over the pe­riod, which could be as a re­sult of the in­tro­duc­tion of tax-free sav­ings ac­counts, Dempsey added.

Pol­icy lapses, where poli­cies fall away due to non­pay­ment of pre­mi­ums, de­creased 5% for risk poli­cies, show­ing that con­sumers were hold­ing onto their life and dis­abil­ity cover de­spite the tough eco­nomic cli­mate, he said.

Pol­i­cy­hold­ers should speak to their in­sur­ers about a pre­mium hol­i­day or a re­duc­tion in cover, rather than laps­ing a pol­icy and leav­ing them­selves with­out fi­nan­cial pro­tec­tion for un­ex­pected events, Dempsey said.

Con­sumers re­ceived R422bn in ben­e­fit pay­ments from life in­sur­ers over the pe­riod, which Dempsey said showed that life in­sur­ers were not try­ing to avoid pay­ing claims and had pro­vided fi­nan­cial sup­port when it was needed most.

 ??  ?? Peter Dempsey
Peter Dempsey

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