South Africa's life insurance industry shows resilience with record payouts in 2024

South Africa's life insurance industry closed the year 2024 in a strong financial position, maintaining its ability to weather economic uncertainties, according to the Association for Savings and Investment South Africa (Asisa).

With assets under management totalling a staggering R4.5 trillion, the industry also achieved a solvency buffer of 1.99—nearly double the Prudential Authority's Solvency Capital Requirement (SCR).

Figures released by Asisa reveal that life insurers paid out R639 billion in claims and benefits during 2024, marking a record high. These payments, which included retirement annuities, endowment benefits, and claims related to life cover, disability, critical illness, and income protection, offer vital financial support to policyholders and their beneficiaries during life's most challenging moments.

Gareth Friedlander, a member of the Asisa Life and Risk Board Committee, highlighted the industry's critical role in supporting the economy. "Over the past five years, Asisa members have paid close to R3 trillion in claims and benefits to policyholders. These proceeds have often been used to fund living expenses, representing a significant economic contribution."

Despite these considerable payouts, the industry remains steadfast in its ability to fulfil its long-term commitments. Friedlander noted, "The resilience shown by the industry, particularly in the aftermath of the Covid-19 pandemic, underscores its robustness. Policyholders can take comfort in knowing that legitimate claims will be honoured".

The total number of active risk and savings policies increased to 44.43 million by the end of 2024, up from 43.76 million the previous year.

Consumers purchased 10.39 million new recurring premium risk policies in 2024, with funeral policies (6.24 million) and credit life policies (1.56 million) leading the way. This marks a 4.2% increase in new risk business compared to 2023, the figures show.

Encouragingly, the rate of lapsed risk policies has continued to decline for the third consecutive year. In 2024, 8.20 million risk policies lapsed, compared to 8.25 million in 2023 and 8.33 million in 2022. A policy lapse occurs when premium payments for a policy without a fund value are discontinued.

The sector has also seen signs of recovery in individual recurring premium savings policies, such as endowments and retirement annuities. In 2024, consumers purchased 568,586 savings policies, representing a 5.9% increase from 536,784 in 2023.

However, single premium savings policies experienced a 3.7% decline, dropping from 215,807 in 2023 to 207,744 in 2024.

Policy surrenders—where policyholders withdraw funds before maturity—also decreased for the third consecutive year, with 521,736 policies surrendered in 2024 compared to 563,326 in 2023.

"This steady increase in new savings policies alongside a decline in surrenders is a positive development, particularly given the tough economic climate. It reflects an encouraging recognition of the value of disciplined savings," Friedlander observed.

While the trends are encouraging, Friedlander warned that the lapse rate remains concerning. "Each lapsed risk policy widens South Africa's insurance gap, leaving families vulnerable in the event of death or disability."

He urged policyholders to seek financial advice before cancelling a policy. "Lapsing a risk policy not only strips you and your family of vital cover but may also make it difficult to secure similar cover later due to age or health changes."

Friedlander encouraged consumers to explore alternatives with their financial advisers. "An informed decision can safeguard your financial security and ensure peace of mind, even in challenging times."

PERSONAL FINANCE