The risk of inaction: addressing SA’s short-term insurance crisis
South Africa faces a rising shortfall in short-term risk protection, particularly for natural disasters. The 2022 KwaZulu-Natal floods exposed the extent of this gap, with the Santam Insurance Barometer Report 2022/23 estimating total economic damage at R54 billion - yet only half of this amount was covered by insurance.
According to Gloria Tapon Njamo, CEO of Santam Partner Solutions, the lack of coverage disproportionately impacts the most vulnerable in society.
Barriers to short-term insurance uptake
“Many South Africans are under or uninsured due to high living costs and economic challenges,” says Njamo. “Unfortunately, close to three-quarters of the population lack short-term insurance, which leaves them exposed to financial ruin when disaster strikes. Government has called for collaborative efforts, including public-private partnerships, to improve access and affordability of insurance in vulnerable regions.”
One significant barrier to short-term insurance uptake, she mentioned, is the lack of sufficient knowledge among low-income communities. The insurance industry can address this challenge by forming partnerships and engaging in collaborative efforts to educate these communities about the importance and benefits of short-term insurance.
The South African government emphasised the issue during the 2024 Medium-Term Budget Policy Statement (MTBPS), raising concerns about the increasing frequency and severity of climate-related disasters and the fiscal burden on society. Njamo stresses that insurance providers must adopt new approaches to address these concerns effectively.
“Reaching underserved communities is also about building trust and understanding. You need to understand the people you are serving and what insurance measures they already have in place, which you can tap into or use to better serve those communities,” said Njamo.
Building trust through partnership
Reaching underserved communities is not just about offering products; it is about building trust and understanding. “When it comes to short-term insurance related to assets, most people don’t fully understand the risks involved,” Njamo explains. “South Africans tend to favour communal ways of living, such as stokvels and other collective savings groups, but these arrangements come with their own risks, such as misappropriation of funds.”
Njamo highlights that the insurance industry has a crucial role to play in bridging the risk protection gap by implementing innovative strategies that focus on accessibility, trust-building, and education. Santam, for example, is addressing these challenges by partnering with well-established retail and telecom brands to make insurance more accessible.
“Retailers and telecom companies have an extensive footprint across South Africa, with physical locations in both urban and rural areas where trust in brick-and-mortar establishments remains strong,” she notes. “By embedding insurance products within their offerings, such as providing add-on warranties for consumer electronics, we make insurance more relatable and easily accessible.”
Overcoming challenges of digital trust
Despite these efforts, Njamo acknowledges the growing challenge of online fraud and scams, which intensify mistrust in digital platforms. This is why Santam's strategy includes distributing products through familiar and trusted brands with physical outlets.
“By embedding insurance into everyday consumer transactions, such as purchasing TVs or phones, we help consumers understand how coverage applies to essential assets like household goods or small business stock, rather than just high-value items such as homes and cars,” Njamo explains.
Insurers can ensure that products remain relevant and adaptable to the evolving needs of communities by focusing on the following key strategies:
- Partnerships with trusted brands: collaborating with well-established retail and telecom companies to enhance accessibility. These partnerships help embed insurance products into everyday consumer transactions, making it easier for communities to access coverage in familiar settings.
- Education and awareness: providing clear information about insurance coverage is essential. Insurers should focus on educating consumers about the specific risks their products cover, helping them understand the value of insurance.
- Integrating insurance into daily life: by integrating insurance products with everyday purchases, insurers can make coverage more relatable. For example, offering insurance as an add-on when buying household items helps consumers see its relevance in their daily lives.
A collaborative path forward
Njamo believes that collaboration across sectors is crucial to closing the insurance gap. “We must work together - insurers, government, and retail partners - to create products that are both affordable and accessible, while ensuring they meet the needs of South Africans,” she concludes.
By integrating insurance solutions into daily life, insurers will create long-term financial resilience within underserved communities. With the right partnerships and educational efforts, the future of short-term insurance in South Africa could become more inclusive and sustainable.
Writer’s Thoughts
Bridging South Africa's short-term insurance gap requires a collective effort from insurers, government, and retail partners to ensure accessible, affordable coverage for vulnerable communities. By fostering trust and embedding insurance into everyday transactions, we can create a more resilient and financially secure future for all South Africans. Do you agree? Please comment below, interact with us on X at @fanews_online or email me your thoughts myra@fanews.co.za
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