Consumers cash in savings policies to make ends meet
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.