South Africans are experiencing increased financial strain, leading to tough decisions on allocating their money, with insurance cover potentially being compromised. As households struggle with debt repayments and rising living costs, some consumers are reducing their insurance cover or allowing policies to lapse, leaving them exposed to financial shocks. DebtBusters' 2026 Money-Stress Tracker found 72% of 18,000 respondents experienced money stress, up from 70% last year.
The South African Financial Pressure Index (SAFPI) revealed that the median applicant was committing 58.4% of their net income to debt repayments before essential expenses. Insurance growth has been modest, with most sales at the lower end of the market, dominated by smaller funeral policies. The estimated gap between the insurance South Africans have and what they need has widened, according to the Association for Savings and Investment South Africa.
Yura Kaliazin, senior associate director for Actuarial & Insurance Solutions at Deloitte Africa, stated that disposable income for insurance is scarce given current economic conditions. While not seeing a surge in consumers reducing cover or cancelling policies, Kaliazin noted indications of rising lapse rates. If economic conditions persist, he expects lapse rates to accelerate as insurance affordability becomes increasingly questionable.
FNB Insurance's CEO, Himal Parbhoo, reported that household financial pressure is reflected in their collections and attrition data. Higher living costs, fuel-price movements, and international uncertainty have strained disposable income, causing insurance premiums to compete with essential expenses. The lapse pattern is pronounced around six and nine months after policies are taken out, particularly among Entry Wallet, Entry Banking, and Middle-Income customers.
Yazeed Adams, head of strategy, governance, and transformation at MiwayLife, noted that insurance premiums may seem like an expense rather than protection when households cut spending. Clients are seeking advice on adjusting policies rather than cancelling them outright, a more sustainable approach. The financial need the policy addressed does not disappear simply because a household can no longer afford the premium.
There is a risk that consumers reducing insurance cover may end up protecting against the wrong financial shock or buying insufficient cover for the risks they face. Dread disease, critical illness, and disability are areas where South Africans are commonly underinsured. Bidvest Life's 2024 claims data showed clients were more likely to claim on income protection than on critical illness lump-sum benefits or death benefits.
The issue is particularly important for women, whose careers may include reduced working hours, childbirth, or caring responsibilities. Women accounted for 51% of Bidvest Life's income-protection claimants in 2024, while childbirth accounted for 19% of all income-protection claims. Financial-planning conversations should consider what happens if someone's ability to earn is interrupted, according to Claudelle Jacobs, head of claims at Bidvest Life.
Key points
- South Africans are experiencing increased financial strain, leading to tough decisions on allocating their money, with insurance cover potentially being compromised.
- The estimated gap between the insurance South Africans have and what they need has widened.
- Women are disproportionately affected by income interruption, with 51% of Bidvest Life's income-protection claimants in 2024 being women.
