Pricing and affordability challenges

Swiss Re expects the global non-life reinsurance market to grow by 3.2% p.a. until 2025. This suggests that despite the challenging conditions, there are opportunities.

On the life and health side, it sees subsiding COVID-19 mortality, hot employment markets and rising wages as supportive for the sector, coupled with higher interest rates.

So, are there opportunities amidst this uncertainty for the South African insurance industry?

Pricing and affordability

Sheldon Friedericksen, General Manager of Group Benefits at Fedgroup, says South Africa is full of opportunities within the life insurance industry. “While these opportunities exist, it will take innovation to realise them and will require several aspects to be in place,” he emphasised.

“While there has been a significant reduction in mortality trends from the highs of COVID, we are seeing some lagging morbidity factors still being experienced. This continues to put pressure on the pricing of risk benefits, balancing affordability, maintenance of benefit value required for the policyholder, and - most importantly - ensuring the sustainability of the price and provision of the benefits to the policyholder into the foreseeable future,” he added. 

There’s pressure on consumers

Another challenge, he said, is the strain on our employment market, especially when we compare ours to the rest of the globe. 

“This, along with rising interest rates, is placing pressure on consumers and they are looking for relief. More economic pressure means people aren’t necessarily able to put money away and for many South Africans, their primary savings mechanism remains their group pension scheme. This often also entails their only holistic life insurance benefits,” commented Friedericksen. 

It is important, he said, that benefit providers such as insurers, asset managers, and medical scheme providers take factors such as high unemployment rates and the uncertainty or informality of income into account and adapt their product offerings accordingly. 

“There is no reason why people shouldn’t have access to flexible benefits that cater for the changing circumstances of the end consumers, or why we can’t be flexible in our approach to premium collection, management, tailoring, and communicating these benefits by capitalising on the capabilities offered by ever-improving technology,” he continued. 

Short and long-term effects

South Africa in 2024 and beyond… what can we expect? “The year 2024 will undoubtedly be an interesting year for South Africa, and South Africans. However, when considering the insurance landscape in 2024 and beyond, I prefer not to focus too much on the short-term effects that a single year might have,” he said.

“While these effects might be of immediate concern, the needs of customers are not likely to shift fundamentally during this period. Consumers require the certainty that comes with having an insurer who can sustainably withstand any challenges that arise within this environment. They require a benefit package that they can rely on during their or their families’ times of need, and they want these benefits at the fairest possible price,” he added. 

“Consumers want to know, with certainty, that their premium payment secures these benefits and that, when required, they will be treated fairly and that their valid benefits will be paid out to them or their beneficiaries in a timely manner,” he continued.

“It is also hard to forecast any long-term effects that could come around in 2024. The world has been and continues to be uncertain with rapidly changing factors that affect all of us every day. What is clear is that, as South Africans, we are tired of non-delivery and expect more from those in a position of power. This is true in all facets of consumers' lives and is the expectation they have for their insurer,” said Friedericksen. 

A step in the right direction

In his concluding remarks, Friedericksen said the year 2024 could be just another year that we let go by, but “we feel that it should be the year that a difference is made, with steps in the right direction taking place one in front of each other to get us to a better destination than we appear to be at the moment in South Africa. These right steps should be in the broadest sense as a nation but often start with us as individuals taking steps in our own lives, such as reassessing our financial goals, having discussions with trust-registered financial advisers, and ensuring that we have made sufficient financial plans, such as having a will, savings and insurance, to look after ourselves and our loved ones when required.” 

Writer’s Thoughts

The insurance landscape in 2024 presents a mix of challenges and opportunities. While the industry faces pricing and affordability challenges, consumer pressures, and short-term uncertainties, there are also opportunities for innovation and adaptation. Looking ahead, the focus should be on meeting the evolving needs of customers, ensuring sustainability, and making meaningful progress toward a better future. It's not just about surviving but thriving in an ever-changing environment. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za