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Pandemic shock shines a spotlight on the value of long-term insurance cover

Pandemic shock shines a spotlight on the value of long-term insurance cover
27-03-23 / Chris Smit

Pandemic shock shines a spotlight on the value of long-term insurance cover

Johannesburg - The local economy may have clawed itself back to its pre-pandemic levels in 2022, but positive as this is, it does little to soften the impact caused by the loss of life and ongoing health issues that COVID-19 left in its wake - and these negative effects will take years to work through the economy.

Of all things the pandemic has highlighted the value of being better prepared for life's uncertainties, in particular the need for life insurance cover so that families can continue to survive after experiencing an event like the death of a breadwinner. 

According to Liberty's Lead Specialist for Research & Insights, Zandile Makhoba, Liberty recorded a 17% rise in the number of life insurance policies taken up by clients earning around R1 million or more a year, since the pandemic. This segment also showed a notable 29% increase in the amounts being insured for in their policies.

"Conversely there was an overall 30% decline in the number of new clients, concentrated in the income segments between R500 000 to R900 000 a year. Notably this segment was also the hardest hit by the post-pandemic economic downturn," she says.

"The gap may be narrowing among the middle- to upper-income groups, who now increasingly recognize the value of this type of cover. Unfortunately, there are still thousands of South Africans who remain uninsured – despite having the financial means to be so and run the risk of tremendous financial harm to their dependants in the unfortunate event of death, critical illness or even retrenchment," says Liberty's Sales Director, Johan Minnie.

"The pandemic raised awareness around the value of life insurance following an unexpected catastrophe; yet there is still an ongoing R34 trillion insurance gap indicated by the Association for Savings and Investments South Africa (ASISA)," he added.

Women encouraged to focus on life insurance cover

Liberty also found that there was no change in the male to female ratio measured by the number of in-force life insurance policies, with 54% of policyholders being men and 46% being women. What was significant is that the average sum assured by male policyholders grew significantly more between 2019 and 2022, perhaps due to the legacy gender skew towards men being breadwinners and financial decision makers in the household.

"Women were just as impacted by the pandemic and had their finances impacted too. This could be stalling their growth. We encourage women to make the effort to take up life insurance cover," says Makhoba.

In addition, there is a demographic trend in that people with post matric qualifications, such as university degrees, are becoming increasingly insured following the pandemic.

"This could be due to improved levels of financial education with this group seeking access to financial advice. Long-term insurance remains a very personal matter and everyone has different lifestyle needs, which is why a financial adviser is able to create a unique solution," says Makhoba.

A long to way to go

While some of the insights may be encouraging, Minnie acknowledges that the industry still has a long way to go towards making a difference in closing the wide insurance gap.

"We are making strides, but the job is far from done. The insurance gap is still too wide for us to feel that people are adequately covered. The pandemic did shine a light on the need for better future planning, and we have also looked at more ways to offer financial planning with our adviser force," says Minnie.

He adds that Liberty’s financial advice philosophy is designed to allow the client to create their own life story through a holistic plan.

With a stressed economy South African's need all the help they can get in navigating not only their finances, but their future: "Financial advisers are no longer just here for insurance discussions, they are here to help you navigate your whole life - whether you’re a young graduate, building wealth in the middle of your career, or looking to retire," says Minnie

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