Affordability pressures to drive innovation as insurance gap hits R50 trillion

As affordability pressures mount, South African consumers may soon see more competitively priced and tailored insurance products, as life insurers race to bridge a widening protection gap.

The 2025 ASISA Insurance Gap Study discloses that although most formally employed South Africans have some level of life and disability cover, the average income earner’s protection remains significantly below what their family would need to maintain its standard of living.

The Association for Savings and Investment South Africa (ASISA) commissioned the study, conducted by True South Actuaries & Consultants, to measure the difference between what people have in life and disability insurance and what they should have to replace lost income in the event of death or disability. Now in its seventh edition, the study has been tracking this “protection gap” every three years since 2007, with the aim of identifying trends and vulnerabilities in household financial resilience.

Key findings: a growing divide

The 2025 study shows that South Africa’s life and disability insurance shortfall has ballooned to R50.4 trillion, up from R35.4 trillion in 2021 – an average growth rate of 12.5% a year.

Despite increases in the number of income earners (from 14.3 million to 16.1 million) and total cover held, the growth in cover has not kept pace with rising incomes and living costs. As a result, most earners have only 39% of the life and disability insurance their dependants would need if they died or became disabled.

The data shows that:

• The average income earner needs R2.1 million in life cover but has only R800 000, leaving a gap of R1.3m.
• For disability, the need is R3m, but average cover is R1.2, leaving a gap of R1.8m.
• On death, a household would need to cut its expenses by 34% or find an additional R7 400 a month through employment to maintain its lifestyle.
• In the event of disability, that figure rises to a 37% cut or an extra R9 800 a month.

Put differently, the study estimates that if one of South Africa’s 16.1 million income earners were to die unexpectedly, their dependants would collectively face a shortfall of R14.3 trillion. If the same individuals were to become permanently disabled, the total shortfall would rise to R36.1 trillion – affecting millions of households and putting immense pressure on families’ ability to sustain themselves financially.

Insurance composition highlights:

• Most life insurance comes from retail policies (60%), with the remaining 40% from group cover.
• For disability insurance, group cover contributes most (46%), with government disability grants playing a significant role (27%), particularly for low-income earners, and 27% from retail policies.
• Most critical illness cover is from retail policies (85%), with the remaining 15% from group cover.

Affordability is one of the biggest factors limiting the ability of households to close this gap. ASISA’s Besa Ruele (pictured), a member of its Life and Risk Board Committee, said the numbers underline the need for innovation:

“The study shows how vulnerable many families remain. But it also highlights an opportunity for insurers to rethink how products are structured and priced.”

 Closing the gap: innovation, inclusion, and efficiency

Many families only realise the extent of their exposure after a loss has occurred. At that point, households are left with two difficult options: drastically cut living expenses – by about 34% following a death or 37% after a disability – or find ways to generate additional income of between R7 400 (death) and R9 800 (disability) a month. For most, these adjustments are neither sustainable nor realistic, particularly when a household has just lost its primary breadwinner or when the affected person can no longer work.

The Insurance Gap Study estimates that an income earner would need to increase their total spend on risk cover by 8.2% of monthly earnings to close the gap – 5.2% for death cover and 3% for disability cover.

Ruele noted that although it is far more cost-effective to address the shortfall while the policyholder is still earning an income than to try to make up for lost income after a death or disability, most South Africans are not in a position to do so: “Considering that salary increases this year are likely to be between 3% and 4%, most income earners cannot realistically allocate [an additional] 8% of their pay to risk cover,” she said.

In other words, products need to become more affordable.

According to actuary WS Nel from True South and the study’s lead researcher, affordability can be improved through three key levers: reducing risk, cutting administrative costs, and lowering shareholder margins. He said insurers have already started to pursue these avenues. For example, some insurers have introduced wellness or behaviour-based rewards programmes that encourage clients to adopt healthier lifestyles or safer habits. By linking premiums or benefits to activities such as regular exercise, preventive health checks, and responsible driving, these programmes aim to reduce risk and, over time, make insurance more affordable.

Nel noted that as insurers integrate artificial intelligence (AI) into their operations, they will be able to streamline processes and reduce costs. However, the challenge will be to ensure that automation improves accessibility without losing the human touch.

Inequality in coverage: what the data shows

The study highlights deep disparities in cover adequacy across income and age groups:

• Life cover adequacy rises sharply with income: high earners meet about 50% of their life-insurance need, while low earners meet barely 10%.
• The richest 20% of earners still face an average shortfall of about R3m.
• Government disability grants eliminate the gap for the poorest earners, but adequacy drops rapidly higher up the income scale.
• Middle- and upper-income earners remain heavily under-insured despite access to group schemes.
• Critical illness cover is rare outside higher-income groups; among the richest 20%, cover averages about 30% of gross annual income (~R0.3m).
• Younger earners face the largest life protection gaps because of long earning horizons and typically low levels of existing cover.
• Cover adequacy improves steadily with age, becoming sufficient from around age 50 onward. Disability cover follows a similar pattern: younger earners are most exposed, while older earners have better adequacy as their working years shorten.
• Overall, less than half of the need is covered across most age groups.
• Critical illness cover increases with age but starts from a very low base. Older earners are more likely to hold critical illness cover, yet their risk of illness rises much faster than their level of protection.

These findings illustrate that although coverage improves with income and age, significant gaps remain for younger earners and middle-income households, highlighting the need for tailored products and targeted interventions.

Using the study to drive solutions

Ruele said the Insurance Gap Study does more than measure shortfalls – it exposes systemic vulnerabilities in South Africa’s financial safety net. The data provides a lens for understanding which groups are most at risk and where interventions can have the greatest impact.

She said the findings should help insurers to refine their product design and pricing strategies to better serve underserved segments, particularly those with lower incomes or inconsistent access to group schemes. At the same time, regulators and policymakers can use the data to identify gaps in social protection and explore ways to strengthen the system through targeted support.

“In the lower 20% of income earners, for example, disability coverage exceeds 100% thanks to government grants, but adequacy drops rapidly higher up the scale,” Ruele said. “Insights like these can help government and the industry collaborate more effectively to close the protection gap.”

Ultimately, she said, the study should prompt both consumers and insurers to take action:

“For consumers, it can serve as a reminder to review their cover and understand what protection their families truly have in place. For insurers, it’s a call to innovate – to deliver affordable, accessible, and relevant protection for every South African household.”