Life insurance industry weathering storm Covid-19


DESPITE the unprecedented claims and benefit payments made to policyholders and beneficiaries as a result of the Covid-19 pandemic in the past fiscal year, the life insurance industry has announced it remains in good shape financial health and that he was still well capitalized to honor the long-term contract. promises made to customers.

The Savings and Investment Association of South Africa (Asisa) released the semi-annual long-term insurance statistics reported by its members, which showed the life insurance industry to hold assets of 3,430 billion rand at the end of June. Industry liabilities amounted to 3.09 trln. This left the industry with free assets of Rand 334.6 billion, almost double the reserve cushion required by the Solvency Capital Requirements (SCR).

Asisa’s life and risk board committee vice chairman Hennie de Villiers explained that a healthy reserve cushion was of critical importance as it allowed insurers to pay claims and policy benefits even in times of extreme market turmoil and / or unusually high claims.

“The Covid-19 pandemic is considered a once in a lifetime event, which has resulted in unprecedented death claims for our industry and yet life insurers are able to withstand the fallout thanks to the reserve buffers that are in place. place, ”said De Villiers.

He noted that despite the higher than usual death claims recorded by most life insurers in the three semi-annual reference periods since the start of the pandemic, the SCR ratio had only declined slightly, indicating resilience. the South African life insurance industry. .

De Villiers reported that policyholders and beneficiaries received claims and indemnity payments worth R315.4 billion from South African life insurers in the first half of this year. Payments to policyholders and beneficiaries included retirement annuities and endowment policy benefits as well as life, disability, critical illness and income protection policy claims.

“This means that R315.4 billion has been paid out to South Africans in the first six months of this year following a tragic life event like death or disability or a change in life. life stage like retirement, ”said De Villiers.

He said that brought the total injected into the South African economy over 18 months to R839.1 billion during a period when many industries were largely crippled by measures taken to curb the spread of Covid- 19.

At the end of June, 40.3 million individual contracts with recurring premiums were in force, including 33.2 million risk contracts (life, funeral, borrower, disability, serious illness and provident insurance).

De Villiers said that while 5.9 million new individual recurring premium risk policies were purchased in the first six months of this year, some 3.7 million risk policies had lapsed. A lapse occurs when the policyholder has stopped paying premiums for an at-risk policy, which had no accumulated fund value.

Asisa said that compared to the first and second half of 2020, there has been a significant increase in new risk policies purchased, while at the same time lapses were much lower.

“The increased uptake of risk insurance policies and the decrease in lapses are positive and indicate that more South Africans are realizing the value of risk coverage than ever before. While an insurance payment cannot make up for the loss of a loved one, it can ease the financial burden on a family when a tragic life event occurs, ”he said.

The annual death claim statistics released by Asisa recently showed that 1,023,083 death claims were submitted between early April last year and late March. The statistics reflected claims made against individual life insurance, group life insurance (offered by employers), credit life insurance and funeral insurance policies. Beneficiaries of policyholders who died during this period received death benefits worth R47.58 billion compared to the previous 12-month period in which R29.08 billion was paid.

De Villiers reported a drop in the number of individual savings contracts with recurring premiums (endowments and retirement pensions) from 6.1 million contracts at the end of December 2020 to 6 million at the end of June of this year.

While 340,126 new policies were sold during the six-month period, 316,023 policies were repurchased. A surrender occurs when the policyholder stops paying premiums and withdraws the value of the fund before maturity.

De Villiers said that while this is concerning, it was not surprising given the impact of the Covid-19 pandemic on the earning capacity of thousands of South Africans.

“When times are tough, consumers are more likely to give up their savings policies to access their savings due to financial hardship. “

De Villiers pointed out that there had been a 3.4% increase in the number of single premium policies (annuities) from 2 million at the end of December last year to 2.1 million at the end of June of this year. He said that, unfortunately, much of this could be due to people taking early retirement or investing in layoff programs.

Statistics have clearly shown that the Covid-19 pandemic has had a devastating impact on millions of South Africans and has pleaded for many to get vaccinated.

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