Policyholders cancel their life (long-term) insurance policies before they cancel their short-term policies, says Mark Danckwerts, a partner for insurance at KPMG.
Danckwerts, together with Nishen Bikhani, partner for insurance at KPMG, last week provided some of the highlights of the recently released 2019 KPMG Annual Insurance Survey.
Danckwerts said that when people were strapped for cash, they tended to cancel their life insurance policies before they cancelled their short-term insurance.
“Life insurance firms suffer more from their topline revenue being eroded due to cancellations. What happens in the short-term side is people tend to hang on to the short-term insurance, because they need insurance for their car.
"For example, if it is financed, you have to have an insurance. But what does happen is that they will easily switch from one insurer to another to save a couple of rand. So people will change from one insurance to another if they get a better quote,” said Danckwerts.
Bikhani said the frequency and severity of the national catastrophes were lower for the last year, which resulted in fewer claims. In the survey, an interesting focus was that of new mobility models, such as ride-sharing and e-hailing services such as Uber and Taxify, which is set to have an impact on personal car ownership, and it is vital that insurers recognise the needs within the market and transform to cater for the shift from asset- to access-based mobility.
According to the survey, South Africa remains vulnerable to weather disasters and drought. However, last year was a good year in terms of claims experience as a result of reduced claims frequency and severity.
According to the Prudential Authority’s 2018/19 annual report, the industry did not experience any catastrophic events last year.
According to the 2018 Santam Analyst Presentation report, there were fewer commercial fire claims last year but the listeriosis outbreak had negatively impacted the liability business.
This was opposed to the 2017 calendar year, which saw various large losses that included the Knysna fires and the Gauteng and KwaZulu-Natal storms.
According to Aon, insurers no longer considered South Africa to be a “low catastrophe risk” economy. More than R5 billion was paid for losses incurred from natural disasters in 2017, the highest recorded.
Meanwhile, the long-term insurance sector has been pushing against an extremely volatile, uncertain, complex and ambiguous political and economic environment in South Africa and globally. The impact of the challenging political and macro-economic environment was evident in the results, which included that:
* Customers’ disposable income is under pressure, which has reduced their ability and propensity to save and invest.
* The pressure and stress on customers’ lives has been apparent in some of the trends in claims.
* Investment returns and fund-related fees took a huge knock last year as the FTSE/JSE All Share Index lost 11.37 percent last year.