Insurance product innovation is crucial to closing South Africa’s insurance gap

Insurance product innovation is crucial to closing South Africa’s insurance gap

The 2022 Life and Disability Insurance Gap Study released by the Association for Savings and Investment South Africa (ASISA) shows that the average South African income earner had a life insurance shortfall of at least R1 million and a disability cover gap of around R1.4 million at the end of December 2021.  The study shows that South Africa’s 14.3 million income earners had only enough life and disability insurance to cover 45% of their total insurance needs of their households.

According to Brad Toerien, a director and co-founder of Aynjil Cancer Insurance, the statistics are telling of just how much strain consumers are under post-pandemic, and how financially unprepared they are for the domino effects of a serious illness or disabling event. More pointedly though, Toerien points out that without innovation in insurance products and distribution, this gap will continue to widen.  Consumers need to protect themselves in a focused and affordable manner against the most prevalent, worst-case scenarios. Toerien adds that a key area where such innovation is needed is in the critical illness insurance space, notably when it comes to cancer.

“Across insurers, cancer accounts for almost 70% of all critical illness claims¹.  And its massively underinsured, especially among younger people in their 20s and 30s who have little to no cover in place, believing that this is an illness that they need to worry about when they are older.  The cancer statistics however paint a very different picture. The problem with this that if they do get an illness in their younger years, like cancer – they may find themselves uninsurable in future, either because of exclusions or unaffordable premiums which puts cover out of reach.

“Closing this insurance gap requires two key measures – an enormous amount of awareness and education – and this is where financial advisers are crucial, and the second is product innovation that allows people to take care of their most pressing risks, such as cancer, more affordably,” adds Toerien.

In a nutshell, the ASISA study shows that of the 14.3 million income earners – 3.7million are under the age of 30 and 4.3 million are between the ages of 30-39.  Combined, these two age groups represent the biggest proportion of economically active people, and it’s also where the biggest insurance gap lies. “To close this gap on life cover alone, income earners would need to spend 4.5% more of their gross income before tax. I simply don’t ever see this happening given the significantly affordability challenges, especially around comprehensive critical illness cover,” explains Toerien.

In many respects, critical illness insurance and medical scheme benefits have many parallels that make cover unaffordable for a huge swathe of South Africa’s population. Consider for example, that the key reason behind the high cost of medical scheme membership that excludes millions of people from cover is that legislation requires that medical schemes must cover a list of prescribed minimum benefits (PMBs) as stipulated in the Medical Schemes Act, which all members pay for as a base cost, whether they use these benefits or not. This core cost of PMBs puts even a starting core hospital plan at around R1200 for the main member only. 

“Similarly – although it’s not prescribed by regulation but rather a case of actuarial modelling – broad based critical illness insurance also covers a wide base of critical illnesses and they are fully underwritten, which makes cover more expensive, and in many respects, dilutes the benefits. When you consider that cancer accounts for around 70% of all claims, consumers end up paying for a lot of additional cover they may never need. Additionally, anyone with pre-existing health conditions will find critical illness cover to be prohibitively expensive due to premium loadings and outright exclusions on certain cover – such people may forgo any form of critical illness cover as the high costs are simply untenable, and seemingly do not justify the perceived limited benefits. It thus leaves them totally exposed with no cover at all for the single biggest claims cause of critical illness and disability claims – cancer!” explains Toerien.

It is this glaring insurance gap that led to the launch of Aynjil Cancer Insurance by Brad Toerien and co-founder Gareth Quin in October 2022, after more than two years in design and development.

“Aynjil Cancer Insurance is similar to critical illness cover, however it is specialised and solely focused on cancer, which means a much lower monthly premium as we remove the costs that come with insuring a broader range of critical illnesses – for example a 32-year old male can expect to pay just R167/pm for R1million of cover with Aynjil.  Cover is 100% relatable to a cancer diagnosis and there is no medical underwriting required. You can opt for a fixed amount of cover between R500 000 and R2 million – and the policy pays out the full sum insured in a lump sum, upon any confirmed cancer diagnosis, regardless of stage or type of cancer.  In addition to the lump sum cover, Aynjil also provides a suite of added-value, cancer-specific benefits that provide support for both medical and non-medical expenses that are unique to the recovery journey,” explains Toerien.   

Toerien also points out that cancer-specific insurance is not a case of an either/or scenario, and that it works equally well in conjunction with existing critical illness cover.  “Aynjil works well as top-up cover, strengthening any existing critical illness cover in place with the added-value cancer-specific benefits and additional payments for cancer.  You can also rebalance and save money by reducing thecritical illness cover and adding cancer-specific insurance to make up for the heftier financial demands of a cancer diagnosis versus any other condition, at a lower cost than what you would pay by upping your overall CI sum insured.”    

The founders’ quest to find a solution to the financial quandary people find themselves in when faced with a cancer diagnosis was informed by the very personal experience of family and friends.  

“Cancer is different to other critical illnesses – there is a vast difference between the costs and needs when it comes to treating, living with and recovering from cancer, versus that of a heart bypass for example. It warrants a more specialised focus given its far reaching implications for your quality of life, recovery and risk of relapse, and all the related additional costs and emotional toll that go with that. We have seen people diagnosed with cancer that expected to be back on their feet in under six months, only to find that the diagnosis, aggressive treatment and subsequent co-morbidities that come with such treatment left them incapacitated for two years and more.

“In one heart-wrenching case, we are talking to a young woman who was diagnosed this year with cancer for the third time – first was at age 22 with cervical cancer, then breast cancer at 29, and now most recently, colon cancer at age 42. Most people have no inkling of how long their physical and mental recovery will be, or if they could suffer a relapse or cancer that spreads to other organs. This journey can be a lot slower and tougher than expected, which means you could wipe out your nest egg and any savings in the process, or that of your family and loved ones if you have no safety net.  Our key objective is to close this cancer insurance protection gap for South Africans with a niche, highly focused and affordable solution that provides peace of mind for when they are most vulnerable,” concludes Toerien.


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