SA’s life insurance industry is likely to suffer a “mega-blow” from Covid-19 that will be twice as bad as the impact of the 2008 global financial crisis, according to a report by McKinsey. While the rest of the insurance sector will be less badly affected, it will take four years before it recovers to pre-pandemic levels.
McKinsey said new life insurance business could fall 25% while renewal premiums may drop 12% as consumer spending remains under pressure. The National Treasury now expects SA’s economy to contract by 7.8% in 2020 as the pandemic and subsequent lockdown regulations forced dramatic curbs on business activity and consumer mobility. While the Treasury expects the economy to expand by 3.3% in 2021 this will be from a very low base given the extent of the economic decline in 2020, which saw 2.2-million jobs shed in the second quarter alone.
Increased death claims won't be the cause though.