To top
Logo
Articles

Life insurers hit by policy lapses

Most South African insurance companies were concerned about the high rate of surrenders and lapses last year, an Old Mutual actuary said yesterday.

7 April 2008 · 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."

 

 

Make good money choices - join 250,000 South Africans who get our free weekly newsletter! Join the community →
JustMoney logo

info@justmoney.co.za  
5th Floor, 11 Adderley Street, Cape Town, 8001

© Copyright 2009 - 2024 
Terms & Conditions  ·  Privacy Policy

Quick links

Your credit score is ready!

View your total debt balance and accounts, get a free debt assessment, apply for a personal loan, and receive unlimited access to a coach – all for FREE with JustMoney.

Show me!