Narrowing the trillion-rand insurance deficit in South Africa

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Despite this, South African insurers still face a significant challenge in closing the R34.4tn death and disability gap.

Unpacking SA's insurance gap

For the average South African earner to ensure their family’s standard of living is maintained in the event of their death, they need coverage of R1.8m. However, most South Africans have life cover of less than R800,000 – leaving an R1m insurance gap. This gap increases to R1.4m in the event of disability.

The insurance gap varies across different segments of the population, including income, education, age, province, and gender.

This gap represents a significant risk, particularly for households reliant on a sole breadwinner. Without appropriate cover, a family’s entire asset base can be decimated leaving them open to serious financial consequences.

As part of Precium’s women-focused audio series, Reclaiming Ambition, Berniece Hieckmann, chief operating officer of Abacus Insurance, a division of Pepkor, shares how she thinks innovation and purpose-led ambition can contribute to a solution:

• Embed yourself in the reality of the consumer: In a society as diverse and unequal as South Africa’s, developing consumer insights is an ongoing journey that must transcend simple demographics. “It’s not a project task, it’s a persistent task,” says Hieckmann, “because people aren’t frozen in time.”

  To stop building antiquated products, organisations need to ensure that their consumer research isn’t done with a confirmation bias. This starts with understanding what problem the business is trying to solve. The innovation is then led by the nature and size of the problem, rather than by trend or technology.

  Hieckmann believes in a multidisciplinary approach to both insights and product development particularly as problems become more complex and systemic.

  “You have to take people from very different disciplines into a co-creative environment where they can see [the problem] from different angles,” she says.

• Real, tangible, valuable: With her background in traditional insurance, Hieckmann believes that the next step for the category will be transforming products into value for consumers. “I’m excited to see insurance becoming real, tangible, simple, and valuable for an average person.”

  This shift is crucial in addressing a major contributor to the insurance gap: widespread mistrust of the industry and a lack of consumer education. Even at the top end of the income ladder (those earning more than R713,000 per annum), there remains an insurance gap of R3.2m per earner, according to Asisa. “There was always this myth in the industry that insurance is sold and not bought. We need to be able to build truly buyable products,” she says.

• Ambition starts with purpose: Having sat in every seat around the boardroom, Hieckmann’s ambitions are deeply rooted in purpose. She is committed to fostering financial inclusion and believes in ensuring that the rise of artificial intelligence benefits all market segments. “How do we make sure that AI benefits everyone? I’m passionate about making sure that we don’t make the invisible economy bigger by excluding them through algorithmic and AI-driven decision-making.”

In the context of South Africa’s shift towards digital-first models, which disrupts the traditionally intermediated insurance sector, this is a vital perspective.

According to the ID4D Global Dataset (an initiative by the World Bank):

• at least 1.1 billion people lack a digital record of their identity
• at least 1.25 billion people lack a digitally verifiable identity
• at least 3.3 billion people lack access to a government-recognised digital identity to securely transact online.

This prevents access to financial and other basic services, as people are unable to verify even the most basic of personal data – including their full name. Where unbanked consumers do have formal identification, they often lack the documentation and credit records required by financial service providers to assess creditworthiness and perform consumer due diligence (often referred to as ‘thin-file’ customers).

With the potential of AI, organisations have the potential to further exclude “invisible” people or harness the power of alternative data, like mobile phone usage, monthly payments such as school fees or electricity bills, social media activity and biometric identities to overcome barriers to financial inclusion.

“Wicked problems are those so vast that it seems impossible for anyone to contribute to a solution. Issues like global warming, poverty, and access to medical care arise from power imbalances. Somebody needs to give. It’s sacrificial. I think that’s the biggest problem that humanity faces: everybody wants a solution, but nobody wants to give,” concludes Hieckmann.

Insurance, at its core, is about protection.

To ensure that those most vulnerable to economic shocks can be protected, the industry must embrace purpose-led innovation that combines technological advancements with deep customer-centricity. This multidisciplinary problem-solving starts with an ambitious proposition to executives and their employees: what is the change we need and how do you contribute to a solution?