South Africa's insurance gap is now R34.4 trillion. That is by how much insured households are short to cover their expenses, should a breadwinner die or become disabled. This is according to the latest Life and Disability Insurance Gap Study.
The research commissioned by the Association for Savings and Investment South Africa (Asisa) is conducted by True South Actuaries & Consultants.
To put the gap into perspective, True South broke it down to household level. It calculated that the average South African income earner had a life insurance shortfall of at least R1 million at the end of December 2021. Their disability cover gap is even higher at around R1.4 million.
Asisa deputy chair of the life and risk committee, Hennie de Villiers, said that at R34.3 trillion, this gap exceeds South Africa's national budget by roughly 15 times and the government's social spending by more than 26 times.
The widening gap is partly driven by the fact that insurance is largely a grudge purchase in SA. Importantly, however, among the 60 million people in South Africa, only 14.3 million earned an income by the end of 2021.
And those 14.3 million income earners only had enough life and disability insurance to cover 45% of their household total insurance needs, on average. So, in homes with one income earner, these numbers mean that even if they did buy insurance, many would still be forced to cut living expenses when the breadwinner dies or becomes disabled.
But it's not just low-income earning households with a huge insurance gap. According to True South's calculations, the top 20% of earners – those earning from R700 000 a year – need R5.3 million in insurance. But they have R3.2 million worth of cover on average. They contributed the biggest portion to the insurance gap at R6 trillion, followed by the income group just below them at R4 trillion.
But at least the highest-earning group still has 60% of its death insurance needs covered and almost half of the disability insurance they need. The poorest income earners only have 6% of the death cover they need. Their disability gap is more than 100% since they would need more income households when a breadwinner is permanently disabled due to their additional needs. But this is also the group who would qualify for the government disability grants.