The Association for Savings and Investment South Africa (ASISA) just published its half yearly long-term insurance statistics. Seldom has there been a better time to reinforce the importance of life assurance than what the country has just been through over the past six months.
The industry played its part in providing premium relief in excess of R1 billion to over 458 000 policyholders during the pandemic. It also paid out R230 billion in claims and benefits in the first half of the year.
In these days, after state capture changed the narrative from millions to billions, it is heartening to know that there is one sector of the economy that fulfils its promises.
According to Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee, the statistics show that despite the impact of the significant premium relief of over R1 billion afforded to policyholders as well as the sizeable claims and benefit payments made, the life industry remains in robust financial health and well capitalised to weather the prevailing tough economic environment. He also indicated that life offices will consider further relief on a case by case basis.
At the end of June 2020, the life insurance industry held assets of R3.1 trillion, while liabilities amounted to R2.8 trillion. This left the industry with free assets of R330 billion, which is more than double the reserve buffer required by the new Solvency Capital Requirements (SCR). Therefore, the South African life insurance industry remains well positioned to deal with economic pressures exacerbated by the COVID-19 pandemic. “This means that we can give policyholders and their beneficiaries the assurance that the industry is well positioned to weather this storm and that we will be able to honour every single valid claim,” says De Villiers.
Claim statistics at the end of June 2020
| ● | There were 41.3 million individual recurring premium policies in force, compared to 42.5 million at the end of December 2019, representing a marginal decline of 2.85%. |
| ● | While 4.6 million new individual recurring premium risk policies (life, disability, dread disease and income protection cover) were bought in the first six months of this year, more than 5.4 million were lapsed. |
| ● | The number of risk policies in force declined from 34.6 million at the end of December 2019 to 33.8 million at the end of June 2020. |
| ● | A decline of 3.59% in the number of individual recurring premium savings policies (endowments and retirement annuities) from 6.5 million at the end of December 2019 to 6.3 million at the end of June 2020, was reported. |
| ● | While 282 467 new policies were sold during the six-month period, 364 887 policies were surrendered. |
| ● | The number of single premium policies declined marginally from 2.9 million at the end of December 2019 to 2.8 million at the end of June 2020. |
While lapses and surrenders are concerning, it did not come as a surprise given the impact of the Covid-19 lockdown on the earning ability of thousands of South Africans. “When times are tough consumers are less likely to take out new savings policies. At the same time more policyholders surrender their savings policies to access their savings due to financial hardship,” de Villiers explains.
De Villiers further points out that since financial intermediaries were not considered an essential service during the hard lockdown period, it limited their ability to advise clients. This contributed to the significant reduction in new business volumes for the first six months of this year.
Click here to download the ASISA media release.
There can be little doubt that the lapse and surrender trend will continue for a while yet, given the poor state of the economy, and the gloomy forecasts for the next few years. Whilst unemployment and financial hardship may contribute to decreasing savings levels, the need for life cover is greater than ever. The threat of Covid-19 really brought the reality of our own mortality to the fore in a much stronger way than anything else could.
