JOHANNESBURG – We’ve always known that underinsurance was a problem in South Africa, what with only a third of drivers insured and all, but it seems to have worsened.
Fifty percent of adults do not have any kind of financial product covering risk, up from 40% last year, the latest FinScope South Africa consumer survey finds. Both formal and informal means of insurance cover have declined significantly. Even funeral cover has fallen.
The survey, conducted by TNS South Africa on behalf of FinMark Trust, is based on 5 000 face-to-face interviews with adults aged 16 years and older.
While 18.5 million people are insured, only 6.6 million have non-funeral insurance and 5.5 million have two or more funeral cover products, despite a significant drop in burial and funeral cover. The graph below reflects the percentage changes in various categories of insurance.
Source: FinScope South Africa 2015
More than half of those without non-funeral insurance products say they can’t afford them, FinScope finds.
The prevalence of life insurance among those between the ages of 18 and 29 slipped from 24% in 2014 to 15% this year.
Meanwhile, some 3.7 million adults, or 10%, have considered cancelling insurance or investment policies in order to pay back money they have borrowed. Worryingly, this has climbed from 6% or 2.2 million in 2014.
Speaking at the launch of the survey on Tuesday, Rob Powell, CEO of TNS South Africa, submitted that insurance companies err on the side of promoting rewards – such as no-claim bonuses or gym discounts – rather than promoting the benefits of insurance, namely, protection against unforeseen financial knocks.
“This creates the incorrect perception in the minds of people as to what the actual benefit of insurance is,” Powell suggested.
It may also contribute to reputational concerns that people have about the insurance industry, where they fear that the benefits due to them under their policy won’t be paid out and so elect to simply forego cover altogether.
FinScope finds that in 2015, 4.6 million South Africans declared they were no longer being insured versus 2.7 million in 2014.