Advice central to claims payouts and growing assets
If you or your clients are invested in collective investment schemes (CIS), or holders of a life insurance policy, then you should take a keen interest in the state of the broader financial services sector. The latest media releases shared by the Association for Savings and Investment South Africa (ASISA) suggest you have little to be concerned about.
Close to a million life claims
The first positive news was published under the byline ‘Life insurers settled 95.6% of all death claims in 2024’.
According to ASISA, its life insurance members paid over R39.5 billion to beneficiaries of life and funeral policies over the 2024 calendar year, processing 914258 death claims against individual life, credit life, funeral and universal life policies.
Gareth Friedlander, a member of the ASISA Life and Risk Board Committee, said that the average claims payout rate for life and funeral policies has remained steady at between 94% and 96% since 2021. Unfortunately, 4.4% of declined claims translated to a hefty 40433 claims in 2024. Insurers routinely decline claims where dishonesty or fraud is involved, or where contractual exclusions render a claim inadmissible.
One common exclusion-based rejection reason is that suicide claims are not entertained within the first two years after a policy is taken out. As for dishonesty, many insureds fail to disclose material information about their lifestyles or medical conditions when taking out a policy. Friedlander reiterated that a life insurer will only decline a claim if there is evidence of a crime, if the benefit definition is not met or if an exclusion applies.
He added that insurers exist primarily to provide consumers with the option of protecting themselves and their loved ones against the financial impact of an event like death, disability, or critical illness. Being honest when taking out life insurance is non-negotiable, and one of the best ways to ensure that your beneficiaries are looked after should a life-changing event occur.
Credit life claims rejections look dire
ASISA has been collating claims payout statistics for all types of life policies going back to 2021. In the latest year, they report payouts for life insurance (R28.9 billion); funeral policies (R7.3 billion); combined or universal life policies (R2 billion); and credit life policies (R1.3 billion). Their detailed breakdown of the claims paid versus claims declined in each category makes for interesting reading too. For 2024, 97.3% of life policy claims were paid compared to 88.1% for credit life, 94.7% for funeral policies and 99.9% of combined policies.
Friedlander said that the highest average claims payout percentage is typically achieved for life insurance policies (and the old universal life policies), because they require some form of risk screening, like health assessments and lifestyle questions, before the applicant’s life is insured. “Life insurance policies can offer life cover worth millions of rand, and the underwriting process reduces the risk of fraud and non-disclosure at the application stage,” ASISA wrote.
Funeral insurance policies are designed to pay out quickly and without hassle. This, coupled with the fact that there are regulatory limits on the maximum sums insured, means that there are usually no medical underwriting conditions when taking out the policy. Insurers achieved an impressive payout-to-claims-declined ratio for funeral policies, though declines do occur for the reasons already mentioned. To prevent individuals buying cover after developing a severe illness, insurers impose a six-month waiting period for deaths due to natural causes.
That brings us to credit life policies, which are designed to cover loans should the policyholder die before the debt has been settled. According to Friedlander, claims against credit life policies are most commonly declined because the cover lapsed due to non-payment of premiums, or the outstanding loan balance had been settled.
The role of advice in risk cover
Taken together, the ASISA life statistics reinforce an important truth: well-structured policies, chosen with guidance and maintained correctly, deliver reliable protection when it matters most. Advisers prove their worth by helping clients select appropriate cover, understand exclusions and avoid other pitfalls that could undermine their claims experience.
Protection is only half the story. In the second half of this newsletter, we reflect on recent developments in the unit trusts world. Thanks to the JSE All Share Index’s (ALSI) recent move above 100000 points, ASISA was able to trumpet the local CIS industry powering through the R4 trillion in assets under management (AUM) level, ending June 2025 with R4.16 trillion. The ALSI outperformed major United Kingdom and United States stock market indices in rand terms over the 12 months to end June, delivering a return of 25.2%.
Sunette Mulder, ASISA’s chief of staff, said the latest AUM total reflects a combination of robust domestic equity market growth and healthy net inflows from investors. The industry recorded R146.13 billion in net inflows over the 12 months to end-June 2025, with the bulk being from reinvested dividends and interest. R18 billion of the R23 billion in new cash invested over the year was contributed during the first and second quarters of 2025, pointing to renewed investor appetite for the country’s 1899 local CIS portfolios.
Multi-asset everything
Multi-asset portfolios remain the flavour of the month, racking up over half (R77 billion) in net inflows for the 12 months to the end of June 2025. According to Mulder, multi-asset portfolios are designed to offer your clients single diversified portfolios that can smooth out the highs and the lows of the markets. There are seven types of multi-asset portfolios in the CIS universe including Flexible, High Equity, SA High Equity, Medium Equity, Low Equity, Income and Unclassified.
The split between SA Multi Asset Income and SA Multi Asset High Equity portfolios offers a useful view of investor sentiment. “Investors are showing a whole lot of caution, but with a healthy appetite to participate in the stock market run,” Mulder said. SA Multi Asset Income portfolios attracted R37.1 billion in net inflows over the 12 months, while SA Multi Asset High Equity portfolios claimed R24.6 billion, together accounting for the bulk of the flows to SA Multi Asset portfolios. The balance of AUM is shared between SA Interest Bearing portfolios (30%), SA Equity portfolios (19%) and SA Real Estate portfolios (1%).
The question top of mind when your clients interrogate you about their discretionary investments is how much to split between domestic and offshore. Although not a direct proxy for the onshore versus offshore debate, locally registered foreign portfolios crossed the R1 trillion threshold for the first time, ending June 2025 with R1.04 trillion in AUM. These portfolios recorded net inflows of R1.82 billion for the quarter ended June 2025, and R13.08 billion for the 12 months.
The 763 foreign currency unit trust portfolios are denominated in currencies such as the dollar, pound, euro and yen and are offered by foreign unit trust companies locally. These portfolios can only be actively marketed to South African investors if registered with the Financial Sector Conduct Authority (FSCA). Local investors wanting to invest in these portfolios must also comply with Reserve Bank regulations and utilise their foreign capital allowances.
Are investors still hedging their bets?
To conclude, ASISA offered a brief update on the South African hedge fund industry, which ended the half-year with R181 billion AUM. This total, which excludes hedge fund of funds, represents a marginal drop in assets compared to the end of December 2024, when assets stood at R185 billion. Mulder said the hedge fund industry recorded net outflows of R17 billion in the first six months of 2025. Over the same period, the number of hedge funds declined to 216.
The hedge fund experience is a reminder that not every segment of the market is in growth mode. For advisers, the takeaway is that strong claims performance in life insurance and growing assets in CIS only matter if clients are guided into the products that will serve them best.
Writer’s thoughts:
A strong life insurance claims performance and rising assets under management mean little without good financial and risk advice. How do you make sure your clients end up in the right insurance and investment products? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
