The average South African income earner had a life insurance shortfall of at least R1 million and a disability cover gap of about R1.4 million at the end of last year, according to the 2022 Life and Disability Insurance Gap Study released by the Association for Savings and Investment South Africa (Asisa) last week.
The study shows that South Africa’s 14.3 million income earners had only enough life and disability insurance to cover 45% of household expenses. The average household would, therefore, be forced to lower their standard of living should the breadwinner die or become disabled.
The study is undertaken every three years by Asisa in partnership with True South Actuaries & Consultants. The insurance gap is defined as the difference between life and disability insurance cover in place and the actual amount required by households to maintain the same standard of living after the death or permanent disability of an income earner.
Hennie de Villiers, deputy chair of the Asisa Life and Risk Board Committee, says the total insurance need of South African households was an estimated R62.9 trillion at the end of 2021. With cover in place of only R28.6 trillion, the gap was R34.3 trillion. This represents a marginal widening (0.2% per year) in the gap compared with the 2019 study.
To give context to the sheer size of the gap, De Villiers says consolidated government expenditure for 2022/23, as announced in the 2022 Budget, is R2.16 trillion. The insurance gap of R34.3 trillion is therefore about 15 times the National Budget.
De Villiers says that although the gap widened only slightly since the last study, the country’s income earners declined from 15.6 million at the end of 2018 to 14.3 million at the end of 2021. This means that 1.3 million people stopped earning an income, which decreased the insurance need calculation.
“The three-year period since the insurance gap was measured at the end of 2018 included the two years during which the Covid-19 pandemic resulted in unprecedented economic hardship, which caused significant job losses,” says De Villiers.
He says, however, that the pandemic, like few other events in the history of South Africa, highlighted the importance of having risk cover in place. During this period many life insurers paid the highest number of claims in their history.
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