Non-life insurance product penetration and its use has remained low and to some extent stagnant over the years. By the end of 2018, eNaTIS statistics indicated that there were about 12, 5 million live vehicles on South African roads, however, the number of such vehicles being insured has remained low at range of between 35% and 37%. This presents challenges for the non- life insurance industry as it implies that only 1 out 3 cars on the road is covered in the event of an accident or any other event that could lead to the loss or damage of the vehicle.
The statistics for housing are even worse. They indicate that out of 77,7% of South African households who lived in formal houses in 2013, non-life insurance penetration is extremely low at 4% home contents and 3% building cover.
The FinScope survey, in which SAIA participated in 2018, is a representative study of access to and usage of financial services. The FinScope survey commissioned by the FinMark Trust, looks at the client needs together with their attitudes to financial products and services. It is important to note that various factors impact the development and distribution of products and client needs is but one of these factors.
Businesses thrive under different and challenging micro and macro economic landscapes in any country setting. These include political, economic, social environment amongst other factors. The Meso level is the transactional environment, which includes suppliers, competitors, interest groups, etc. This level is important as it represents various external support services that an organisation depends on to do business. For example, insurers depend on banks to collect premiums, therefore banks reside at the Meso level for insurers. Another example is service providers like panel beaters and plumbers. The Micro level is the organisation itself, its competitive advantage, strengths and weaknesses, etc. The Client, according to this framework is at the core.
Some of the obvious factors impacting clients and potential clients’ appetite for asset cover are the slow economic growth that South Africa has been experiencing for several years now, together with the increase in unemployment. The Study however focused on more personal factors such as consumer attitudes, trust, perceptions and risk coping mechanisms, in the absence of insurance products.
Some of the interesting results from the FinScope Study is that 67% of adult South Africans trust insurance companies. However, 53% of the same disclosed that they find the language used in financial paperwork somewhat confusing. This is a well-known challenge in the financial sector, which has attracted a number of laws to try and resolve it. Perceptions about insurance vary, with funeral cover being one of the first insurance products that come to mind when South Africans talk about the topic. Only 15% of the respondents spoke about insurance as a mechanism to protect themselves against asset loss.
On the question of how South Africans cope with losses, 11% said they had lost a valuable asset while 10% had been affected by a natural disaster, in the last twelve months. The results show that 47% of adult South Africans that lost an asset did not have a coping strategy following the loss, while 50% of the same did not cope with a natural disaster affecting their house/home. Only 5% and 3% respectively had an insurance policy while 8% and 13% of adult South Africans turned to credit providers to cope with their losses.
In conclusion, a lot more can be done to improve access to insurance products, especially non-life insurance products. Even more in a weak economy, as South Africans cannot cope with losses they experience, if they do not have insurance. Some of the burden still lies with insurers in coming up with innovative ways to improve product penetration. Perhaps we can start by increasing the car insurance penetration rate from 37% to 40% and maybe 10% for non-motor products.
For more information contact:
Zanele Gigaba, Transformation Manager