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Sector Overview - Life Insurance
Reaping The Rewards of Resilience In Turbulent Times
By Shumirai Chimombe
The life insurance market in South Africa has been experiencing significant growth and development in recent years. The South Africa Life Insurance Market Research Report by GlobalData indicates that in 2023 the gross written premium (GWP) of the market was R614.7 billion ($36.7 billion) and is expected to achieve a CAGR of more than 5% during 2024-2028.
This growth in demand is attributed to the growing awareness of the need for financial protection and the rising middle class. According to Statista, customers are increasingly seeking life insurance products that offer not only financial protection but also investment opportunities and additional benefits such as health and wellness perks. This shift in preferences is driving insurance companies to innovate and offer more comprehensive and customisable life insurance solutions to cater to the evolving needs of the market.
One notable trend in the South African life insurance market is the growing popularity of digital insurance platforms and online distribution channels. Consumers are increasingly turning to digital channels to research, compare, and purchase life insurance policies, prompting insurance providers to enhance their online presence and offer seamless digital experiences. Additionally, there is a rising demand for sustainable and ESG (Environmental, Social, and Governance) focused life insurance products, reflecting a broader global trend towards responsible investing and ethical consumerism. - Statista
The South African Insurance Industry Survey 2024 by KPMG states that the 2023 financial results of insurers who participated in the survey show a welcome reprieve from the challenges they faced over the last few years. The sector was significantly affected by events such the COVID-19 pandemic in 2020, the Kwa-Zulu Natal and Gauteng riots in 2021, the floods in KZN in 2022, and other ongoing infrastructural challenges.
As a result, these were some of the toughest years experienced by the insurance industry, which tested the resilience and core purpose of the sector. However, the strict measures that the insurers put in place to restore profitability have started to reap the benefits they set out to achieve.
“The industry stood up to the challenges of the last few years masterfully and there continues to be a lot to be achieved in the coming years. Life insurers will continue to assess how best to grow profitably and outmanoeuvre their competition. There is no doubt that new and emerging technologies could offer a host of potential benefits to those that are willing to embrace change. Integrating these technologies could enable precise predictions, manage customer interactions and expand the personalised service and product lines with unprecedented accuracy and speed.”
Rising Trends In The Market
The life insurance market research report by GlobalData shows that the key distribution channels in the South African industry are banks, direct from insurers, financial advisors, online aggregators, and insurance brokers. In 2023, the brokers channel held the highest share in life insurance distribution, accounting for over 51%, followed by agencies. Brokers play a vital role in insurance sales and insurers are focusing on improving their digital access.
Digitalisation in distribution, ESG (preventing and reducing environmental, social and governance risks), mental health claims, insurer-insurtech partnerships, and insurtech funding are the recurring trends in the South African life insurance market. Insurtech, short for “insurance technology,” refers to the use of innovative technologies such as AI to improve and automate the traditional insurance industry to enhance customer experience, streamline operations, and create personalised insurance products through the application of cutting-edge digital solutions.
Direct insurers are leveraging technology to expand their propositions. Sales through cell phone apps and insurers’ websites have gained popularity and policyholders can access a wide variety of services through these channels.
Insurers are also using WhatsApp and USSD to sell policies and services directly to consumers. They have also created seamless online services to enable brokers to digitalise their services.
Traditional insurers and insurtechs are forming partnerships, leveraging each other’s experience and skills, benefiting from insurtechs’ technology and innovation, and traditional insurers’ expertise.
The Evolution Of AI In Insurance
The arrival of generative AI heralds significant progress for the insurance industry, offering insurers a new realm of possibilities.
The KPMG 2023 Global Tech Report shows this shift, with 52% of insurance CEOs identifying AI, including generative AI, as the most critical technology to implement in order to achieve their strategic goals over the next three years.
Some Of The Most Promising Use Cases Include:
Fraud detection: advanced AI algorithms are enhancing fraud detection by analysing patterns in claims data, allowing insurers to proactively identify and prevent fraudulent activities before significant losses are incurred.
Customer personalisation: generative AI is able to analyse vast amounts of customer data to tailor products and services, ensuring that offerings are precisely aligned with individual needs and preferences.
Efficient claims processing: AI-driven automation is revolutionising claims processing by reducing handling times and improving accuracy, ultimately leading to a superior customer experience.
Conversational agents: generative AI enables conversational agents to provide personalised, human-like interactions.
“Generative AI is not just another technological advancement, it is a catalyst for transformation within the insurance industry. By integrating advanced AI techniques, insurers can unlock new efficiencies, deliver highly personalised services, and lead the way in shaping the future of insurance. The journey toward AI-driven innovation is just beginning, and those who embrace it today will be the leaders of tomorrow.” - KPMG
R614.7 BILLION ($36.7 BILLION)
CAGR (2024-2028)
Marke Size (2022) >5%
Registered Insurance Entities In South Africa
Life Primary Insurers:
March 2023 - 158
March 2024 - 157
Life Cell Captives:
March 2023 - 5
March 2024 - 5
Life Microinsurers:
March 2023 - 10
March 2024 - 11
Non-life Cell Captives:
March 2023 - 7
March 2024 - 6
Non-life Captives:
March 2023 - 4
March 2024 - 6
Composite Microinsurers:
March 2023 - 4
March 2024 - 5
Professional reinsurers:
March 2023 - 9
March 2024 - 8
Composite reinsurers:
March 2023 - 9
March 2024 - 8
Life reinsureres:
March 2023 - 1
March 2024 - 0
Non-life reinsurers:
March 2023 - 2
March 2024 - 1
Branches of foreign reinsurers:
March 2023 - 2
Other:
March 2023 - 2
March 2024 - 2
Sources: South African Reserve Bank
