Barriers limiting life insurance uptake in South Africa

Many South Africans are vulnerable to the negative consequences of adverse life-changing events as they do not have life insurance.

Only one out of 10 South African consumers have life insurance, excluding funeral insurance, according to the Financial Sector Conduct Authority’s (FSCA) 2022 Financial Sector Outlook Study. This is down from 12% in 2019.

One of the largest contributing factors is the gloomy economic environment. Poor economic growth, rising inflation, political instability, high unemployment rates coupled with flagging levels of business confidence, all weigh on consumers’ minds and lead to concerns about the future. Throw in declining disposable income, and it’s understandable why policyholders might allow their policies to lapse or actively withdrawn their savings.

There appears to be some mistrust among consumers of life insurance products. This mistrust emanates from low confidence that policies will deliver when needed, and concerns around the policyholder not being around to deal with any issues should they arise. Stories of claims not being paid create uncertainty among policyholders and may leave them wondering if they should have life insurance.

Research shows that many South Africans also have misconceptions about life cover, examples being that “It’s just for the rich” or “It’s just for those who have families”. People also think that a life insurance policy is only designed to cover death whereas disability and so-called “critical illnesses” are covered too.

The truth is that protecting oneself against the consequences of life-changing events is even more important now given that we’ve just been through a global pandemic and that the average consumer can least afford to take a financial hit given the aforementioned consumer landscape. It’s important for everyone to know they should have some form of life cover in place to protect themselves against the unforeseen risks.

While the majority of South Africans overlook this crucial financial coverage, almost all consumers have financial goals. Those goals are typically centered around providing for families, achieving financial success, job security and general well-being. Achieving these goals is almost impossible without some form of protection against unforeseen risks and life insurance can help to manage that.

In the past, purchasing life insurance was often a difficult process, with convoluted application processes, complex policy wordings, and misalignment between pricing and perceived value being amplified by low levels of financial literacy.

The evolution of technology, however, has provided insurers with an opportunity to simplify the consumer journey. Hollard has embraced this evolution to develop a value proposition based on ease, simplicity, trust, affordability and transparency. The insurer is championing a personalised experience for every individual customer by working with financial advisors to offer advice and ensure bespoke financial solutions through genuine engagement and an unmatched sense of security.

Life insurance provides peace of mind by providing a financial safety net and added support for loved ones and dependents when you cannot provide this yourself. By purchasing a comprehensive life policy, the policyholder will not only be covered in the event of death, but also in the event of critical illness or disability, where you are unable to work and earn an income.

The consequences of not being covered can affect families and society in negative ways. On the other hand, appropriate comprehensive life cover will ensure your family can continue living without the burden of debt and an unchanged financial situation, allowing them to continue their life journey.