Life insurers hit by policy lapses

By Staff Writer

By Mzwandile Jacks, Business report

San-Marie Crause, a risk development actuary at Old Mutual, said it was difficult to pinpoint a single reason for the high levels of surrenders and lapses.

"We cannot say whether it is the economy or high interest rates. But we can certainly say that it is likely to have an effect when policyholders come under financial pressures," she said.

Policyholders always cited unaffordability as the reason for surrendering their policies, said Crause.

Marque van der Walt, the head of retail business communication at Metropolitan, agreed that it was difficult to attribute any "decline in persistency" in the long-term assurance industry to any specific economic trend.

"We cannot say Metropolitan is experiencing a rise in policy lapses as a direct result of the economy," said Van der Walt.

Analysts said the increase in surrenders and lapses was due to high interest rates and high costs of food and transport.

An analyst based in Johannesburg said the pressure that insurance companies had to deal with was not different from the bad debts that banks had to deal with.

Steve Meintjes, a senior analyst at Imara SP Reid, explained that the high levels of surrenders and lapses tended to happen when interest rates were high and there was an economic downturn.

Tim Rutherford, a researcher at Ernst & Young, said the first thing that policyholders did when they came under financial pressure was to cancel policies.

However, short-term insurers are not as badly affected as the life insurers.

Merrick Oeschger, the executive general manager at Mutual & Federal, said: "I think the reason for this is that if you decide to cancel insurance on your car, the bank will not allow you to do so.

"What we have experienced, though, is that people are now seriously looking around for cheaper deals."

 

 

Recent Articles

Featured Register your customary marriage or lose the right to inherit estate

December is that time of the year when we will see at least one suitor sending his uncles to negotiate the price of his future wife. Lobola, as the bride price is known, has always been an important element of the African marriage.

Read more

Changing from one medical scheme to another - effortlessly

It is coming up to the end of the year and you might be looking to change medical schemes, or options within a scheme in preparation for the new year. While you don’t necessarily have to wait for year-end to do so, providers often recommend it.

Read more

Your guide to financially surviving Christmas

There are a few times each year where you need to dig deeper into your pocket and spend more money such as birthdays, anniversaries, and the Christmas period. Whether you celebrate this religious holiday or not, the festive period - depending on how you choose to spend it - means increased travelling, buying of gifts, entertaining, and eating out at restaurants.


Read more

Trump, Trump and a little bit of South Africa

What a November we had, with the rand staging one of its best months and closing below the R14.00 level. To be honest, this looked like quite a far-fetched possibility at one stage during the month. It seems that the tide has changed a little, even though it might be short lived since the US dollar bulls are not so sure of their case anymore.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Free iCollege Scholarship

Price: R600
When: Until 16 May 2019
Where: Nationwide

Telkom December Big Deal

Price: R459 pm
When: Until 31 December
Where: Nationwide

Money Savvy Kids Giveaway

Price: R450
When: 8 December
Where: Johannesburg (Milpark)