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Building trust and inspiring confidence

10 July 2017 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

According to recent reports and studies, South Africa is making significant strides when it comes to becoming a financially responsible nation. Savings rates among those who can save are increasing and there is a different attitude towards servicing short-term credit and paying off credit cards.

However, we still have a long way to go. Recent studies by the Association of Savings and Investment South Africa (ASISA) shows that South Africa’s uninsured gap is estimated to be R28 trillion. This points to the fact that some South African families fall into dire straits when losing a loved one. 

This was the topic discussed at a recently held Liberty media round table discussing the topic.

Same old story

Johan Minnie – Liberty Group Executive for Sales, Distribution, and Bancassurance – pointed out that Liberty has been following the trends with great concern over the past 20 years, and it is pretty much the same old story.

“The task ahead of us is daunting. R28 trillion is a massive number which we may not eradicate in our lifetime. However, that doesn’t mean that we cannot try. The problem is that South Africans don’t wake up in the morning and automatically think that they need to insure their life. Yet, when a person purchases a car, as soon as they sit behind its wheel they are cognisant of the fact that they need to insure it,” said Minnie.

He added that we need to make life insurance a top of mind topic. “We need to be able to talk about it around the braai fire. Until we can achieve that… can we say we will be making meaningful strides to eradicating the uninsured gap?” asked Minnie.

A nation of spenders?

While a significant uninsured gap exists in the country, South Africans are enhancing their reputation as prolific spenders on a daily basis. Many economists have pointed to this in the past and have questioned why South Africans seemingly spend freely when it comes to retail spending but are frugal when it comes to spending within the financial services industry labelling insurance as a grudge purchase.

Is this trend at least changing? Robin Wagner, Senior Vice President of International Insurance at TransUnion believes that it is.

“People are servicing debt better. They are becoming more prudent when taking out a credit card or purchasing on credit, and financial institutions are tightening their rules when it comes to who gets credit. The days of mailing a credit card in the post, asking the recipient to sign it, and then giving them licence to go on a shopping spree are long gone. This was a hard lesson learned from the Global Financial Crisis,” said Wagner. He also added that there is more maturity when it comes to utilising credit and that the levels of household debt within South Africa are declining.

Spending on the right thing

By no means were any of the panellists begrudging South Africans from spending the money that they earn. The fact that South Africans are fans of hyperbolic discounting was merely discussed freely and it was suggested that focus should also be paid to spending money on insurance.

And this is also increasing. TransUnion monitors transactions within the short term insurance industry and Wagner pointed out that there is an 8% increase (year-on-year) when it comes to insurance transactions. In the first quarter of 2016, there were 2 125 000 transactions in the industry, during the comparative quarter in 2017 there were 2.3 million transactions.

“As consumers increase their wealth, there is an awareness that protective measures need to be put in place to make sure that this wealth is retained should exceptional circumstances occur. This is becoming especially prevalent among the youth,” said Wagner.

What’s the bottom line?

So if South Africans are spending less when it comes to shopping, and there is a growing interest (especially among the youth) when it comes to insurance, then why is there such a wide uninsured gap?

David Kop, Head of Advocacy and Consumer Affairs at the Financial Planning Institute of Southern Africa, spoke openly about the fact that there is a trust deficit in the market.

“We cannot walk around blind to this fact. There is a problem in the market. We are engaging with our members every day to go out and build trust. Consumers need confidence and advisers need to inspire this confidence. The real proposition from advisers should be the advice that they give. Products are the conduit if this value,” said Kop. 

Editor’s Thoughts:
The task ahead of us is monumental. But the only way to eat an elephant is one piece at a time. We may not see results in our lifetime, but if we create a foundation of trust and prosperity for future generations, this country can become the best in the world. And the financial services industry will be a major contributor to that. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Andre Kotze, 10 Jul 2017
The problem seems to be at the entry level market and to uducate the younger generation.. Does our legislation make it worth while for financial planners to service this market?Does our legislation acknowledge these facts? Will the introduction of RDR improve this situation?Doubt it.
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