Credit crunch causes rise in defaulters
Consumers are letting their life insurance policies lapse to save money which is not a good idea.
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As another sign that South Africans are feeling crippled by the current
economic situation, a leading financial comparison website showed this week that
insurance defaults on life insurance policies have risen by a staggering
percentage in the past six months.
This week, the online financial site, ThinkMoney.co.za showed that in the
past half year, there has been a rise of no less than 260% of South Africans who
have have defaulted on their life insurance, leading many analysts scrambling to
warn consumers about the dangers of insurance defaults.
ThinkMoney.co.za conducted the investigation based on the statistics relating
to the business activities of its partner sites. Consumers who took up life
insurance through these insurance companies were checked for their payment
patterns. It was shown that the number of policyholders who defaulted within the
first two years of taking out the insurance increased dramatically compared to
statistics received six months ago.
"We are used to seeing a default rate of 15 percent to 20 percent in the
first two years of a policy's existence," explained the General Manager of
ThinkMoney.co.za, Mike Kann, "but default rates are now closer to 40 percent.
That is a staggering increase of 260 percent!"
The numbers are staggering, but nevertheless not surprising. In the current
credit crunch, consumers are seeking multiple ways to reduce their expenses and
insurance policies always seem to be the first 'victims' of any cut backs.
However, Kann suggests that even if consumers are struggling with expenses,
they should make every effort to ensure that they are covered, even partially.
He suggests that consumers shop around for more affordable insurance coverage so
that they remain protected, instead of stopping their payments altogether and
losing out on their policies.
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