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Short-term Insurance Industry
This report focuses on South Africa’s rapidly evolving short-term Insurance industry, which encompasses a broad spectrum of personal and commercial lines, including travel insurance. As at 31 December 2014, 90 insurers and seven reinsurance companies were registered with the Financial Services Board (FSB). With gross premium income of R102.83bn in 2014, the non-life insurance sub-sector plays a key role in the financial sector and is an important contributor to economic growth.
Although there are approximately 12.5 million short-term policyholders in South Africa, this figure does not represent market penetration. Results of the 2015 FinScope South Africa Consumer Survey indicate that only 6.6 million South African residents aged 16 years and older have non-funeral insurance cover. Only 4% of respondents had household contents insurance, down from 6% in 2014, while 8% of respondents had motor vehicle insurance, down from 9% in 2014.
A sector Under Pressure
The sector has been under growing pressure in recent years, as it grapples with a barrage of regulatory and technological challenges. With the “Twin-Peaks” and Solvency Assessment and Management (SAM) regulatory frameworks implemented in January 2016, some analysts caution that the sector currently finds itself “on the cusp of major disruption”. Added to these changes is the pressure caused by the weak economy, the sharp depreciation of the South African rand and rising inflation which are expected to result in further interest rate hikes. Analysts also warn that this erosion of disposable income is likely to drive up the policy lapse rate.
The report on the highly competitive short-term insurance sector describes the current market, the latest regulatory developments and discusses factors influencing the success of the sector. The report profiles 49 short-term insurance companies, ranging from industry leader Santam which has almost 20% of the market, to direct insurance company, 1Life Insurance (RF) Ltd. Also profiled are six of the country’s seven reinsurance companies, including Hannover Re and Munich Re which have a combined market share of 65%.