Guiding consumers since 2009

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 Debt Series Part 2: Interest rates - unpacked

In the second part of our Debt-ucate series we explore interest rates –from how to get a better rate to what influences it, and how this affects the cost of your debt.

Debt counselling – the two sides of the coin

Being overindebted doesn’t just put a strain on your personal finances; it also puts a strain on your state of mind. The best solution is to start the process of debt counselling so that you can escape the debt cycle. But what are the ups and downs of joining this debt relief programme?

Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

How to finance and insure a second-hand vehicle

Buying a second-hand vehicle may suit your budget better than acquiring a new one. But what impact does an older model have on vehicle finance and car insurance? We reached out to specialists in the field to explain what the financial implications are of pursuing a second-hand vehicle.

Deals

Get 30% back when you fill up with your Absa card

Price: Available on request
When: Daily
Where: Nationwide

Get 50% back in eBucks when you apply for an FNB home loan

Price: Available on request
When: Daily
Where: Nationwide

Get 50% off your online fees when you pay with Capitec card

Price: Available on request
When: Daily
Where: Online