Consumers buy fewer risk policies, but also lapsed a higher number

THE harsh economic realities imposed on South African consumers during the first half of this year placed a damper on their appreciation of the value of long-term risk protection such as life and disability cover gained during the Covid-19 pandemic.

Recent long-term insurance statistics from the Association for Savings and Investment South Africa (Asisa) show that, in stark contrast to the same period last year, consumers not only bought fewer risk policies in the first six months of this year, but also lapsed a higher number of policies.

A lapse occurs when the policyholder stops paying premiums for a risk policy with no accumulated fund value.

Last year, while the country was still suffering the full impact of the Covid-19 pandemic, the long-term insurance industry recorded a significant increase in new risk policies bought in the first half of the year, with lapses also much lower.

Hennie de Villiers, deputy chair of the Asisa Life and Risk board committee, points out that consumers have had to absorb unprecedented fuel price increases as well as higher food prices and rising interest rates in the first half of this year. At the same time, 64% of South Africans between the ages of 25 to 34 were unemployed according to the Quarterly Labour Force Survey for the first quarter of 2022.

“South Africans in this age group are meant to be economically active and under normal circumstances be concerned with buying risk cover to offer financial protection to their growing families as well as cover credit purchases such as mortgage bonds,” says De Villiers.

He adds, however, that many of those who are employed are likely to be reluctant to commit to monthly premium payments while living costs are at an all-time high.

De Villiers says even credit life policies failed to achieve meaningful growth in the first half of 2022, a sign that consumers were struggling to access credit or practising greater restraint when buying on credit.