a day ago
Insurance in Crisis: Lessons from the Eastern Cape Floods
Reflecting on the devastating floods in the Eastern Cape, this article explores the critical issue of underinsurance in South Africa and the urgent need for public trust in the insurance sector.
Image: Pedro Mapelo / I'solezwe lesiXhosa
By Dr Darlene Kalonji Mbukula
As we celebrated International Insurance day on June 28, it's a time to reflect on how we safeguard our future. But this year, reflection is overshadowed by tragedy. The Eastern Cape has been devastated by floods that have claimed over 90 lives and displaced thousands. These events have exposed a critical vulnerability of underinsurance. As we mourn and rebuild, it's clear that restoring public trust in insurance is not just an industry concern—it's a national imperative.
These crises, be it climate-driven or socially triggered reveal a shared vulnerability of underinsurance. The Financial Sector Conduct Authority's (FSCA) 2023 Retail Financial Customer Behaviour and Sentiment Study paints a stark picture. It reveals that over 40% of South Africans lack confidence in understanding insurance products, and a third believe insurers deliberately avoid paying claims. Thirty-five percent let policies lapse, citing not only cost but uncertainty about value that policies add to their lives. This trust deficit that is rooted in complex policies, unpaid claims, and historical exclusion, keeps insurance out of reach for millions, particularly in rural and peri-urban areas.
Underinsurance is not just a personal risk; it's a societal one. When disaster strikes, uninsured households often resort to selling assets, taking high-interest loans, or relying on overstretched community networks. This perpetuates cycles of poverty and financial exclusion, undermining South Africa's broader economic resilience. The Eastern Cape and KZN crises show how climate and social risks amplify these vulnerabilities, hitting underinsured communities the hardest. Many affected businesses and households cited that they were under insured or not insured at all due to the misconception that insurance is for big businesses or households in elite areas. A clear indication that the public does not fully trust the insurance sector nor are they informed.
The insurance sector must confront its shortcomings. For too long, providers have focused on urban elites, offering solutions that are inaccessible to low-income households. Jargon-filled policies, unresponsive call centres, and opaque claims processes erode confidence. The FSCA's 2023 study confirms this.
Nedbank Insurance is taking steps to lead this transformation. Through its bancassurance model, it integrates insurance into clients' financial lives with four key pillars:
Trust: As a licensed insurer, Nedbank Insurance adheres to strict compliance and fairness standards, giving clients confidence that their claims will be honoured.
Accessibility: Insurance is available across multiple channels—mobile apps, ATMs, branches, and call centres—making it easy for clients to engage wherever they bank.
Integration: Clients can seamlessly add insurance to financial products like home loans, ensuring coverage for buildings, contents, and natural disasters.
Simplicity: By using plain language and intuitive digital tools, Nedbank reduces the cognitive burden of choosing insurance, making it feel natural rather than intimidating
The Eastern Cape floods and KZN riots are not isolated tragedies in thiscountry. They are warnings of a future where climate and social risks converge. Without trusted insurance, vulnerable communities face cascading and insurmountable losses. South Africans therefore must seek insurers that place trust at the centre of their operations.
Insurance month should serve as a conversation starter and through the Money Matters Series that Nedbank Insurance has launched, they are committed to bringing the conversations exactly where South Africans are. From the streets of Jozi, the villages in the Eastern Cape or the townships of KZN, everybody must participate and get the correct coverage for their life stage. Climate change and social tragedies have proven that insurance is more than just funeral policies. People should not wait for the next crisis to consider insurance.
At Nedbank Insurance, we believe insurance should not be a privilege—it should be a promise. A promise of protection, peace of mind, and recovery when the unexpected happens. So let's start the conversation. Let's talk about insurance—the kind you can trust.
* Dr Darlene Kalonji Mbukula is the Executive Head of Client Experience at Nedbank Insurance
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
