SA life insurers inject record R345 billion into economy through benefit payments
South African life insurance companies remain financially healthy and well positioned to honour future benefit payments to policyholders.
The 2014 long-term insurance industry statistics released by the Association for Savings and Investment South Africa (ASISA) this week show that the life insurance industry held assets of R2.2 trillion at the end of 2014, a healthy increase of 12% from the R2 trillion held at the end of 2013.
This means that in 2014 long-term insurance industry assets exceeded liabilities by two times the legal reserve buffer required.
Peter Dempsey, deputy CEO of ASISA, says the financial stability of the country’s long-term insurance industry is of critical importance, considering that the provision of risk cover to consumers is its core business. The life industry is also recognised as the custodian of a significant portion of the country’s long-term savings pool.
In 2014, the total benefits paid to policyholders, beneficiaries, and pension fund members as a result of death and disability claims, maturity pay-outs and pension, annuity and other payments amounted to R345 billion. This is 9% more than in 2013, when total benefit payments amounted to R317 billion.
Dempsey highlights that of these benefits paid in 2014, more than R29.4 billion was paid to individuals who had experienced either death or disability in their family circle.
“The reality is that without the financial protection offered by life and disability cover, many more families would have been left destitute last year. Yet, consumers continue to see long-term risk cover for eventualities like death, permanent disability, temporary disability and dread diseases as a grudge purchase forced on them by advisers.”
In 2014 consumers took out 5 million new individual risk policies to cover events such as death, disability and dread disease. In 2013 consumers took out 5.3 million risk policies. This represents a 6% decrease in the number of policies bought in 2014 when compared to 2013.
“A decrease in the growth of risk policies is of grave concern to the industry, especially since the insurance gap, which is the difference between existing life and disability cover and the actual insurance need of South African earners, had widened to a staggering R24 trillion by 2013. This translates to an average life cover shortfall of R700 000 per average income earner and a disability cover shortfall of R1.1 million.” ASISA measures the life and disability insurance gap every three years.
Dempsey says ASISA is concerned that citizens are clearly neglecting an important aspect of their risk protection planning. The Association will therefore be embarking on focused consumer awareness programmes in 2015.