Discovery Life anticipates its dollar life products will account for about 10% of its total book’s annual premium income by 2025, as more South Africans diversify their risk cover to include life insurance that pays out in dollars.
This is as the company and the industry at large continue to witness an increasing trend of globalisation among South Africans.
Over the past 10 years, premium income from the group’s the Dollar Life Plan has averaged growth of more than 20% per year, with premium volumes more than doubling in the latter half, Discovery said.
The company attributed this growth to an increasing number of South Africans considering offshore planning and a higher proportion of clients opting for coverage in US dollars.
Despite the growth, many South Africans still consider risk protection in a single, local currency, due to a lack of awareness about diversification possibilities, Discovery’s Dollar Research paper found.
Dollar Life Plan has seen an increase in policies sold since its inception in 2014. Discovery said over the last 10 years, the US dollar has strengthened by 68% against the rand, providing an effective 35% boost in payouts for Dollar Life Plan holders compared to local plans.
Discovery Life has also observed a higher uptake of the LifeTime capital disability benefit on dollar plans, with 27% of the dollar capital disability benefit book including this option, more than double that of local Life Plans.
The Unesco Institute of Statistics previously reported that at least 12,000 SA students have studied abroad annually over the past five years. The Institute said this surge in international studies uptake is driven by oversubscription in local universities and the benefits of gaining cultural intelligence and expanding networks.
Discovery Life said it has paid out claims covering the education of nearly 600 children, expecting to fund R527m for their entire education journey.
“Some clients have sought dollar-denominated investments and risk cover because they have international education goals for their children. It is difficult for many parents to plan for these fees even while they are still alive and healthy. But it could become impossible after suffering a life-changing event, like a disability or severe illness. These benefits allow SA parents to lay the financial foundation for a local or international education for their children,” said Discovery.
“SA is an open economy that’s become more globalised in the past two decades. So, when people invest, they often diversify investments with offshore exposure to take advantage of the opportunities beyond our borders. Local investors don’t limit themselves only to stocks on the JSE or industries in SA. They scout for the best possible returns, wherever in the world those may be.”
Standard Bank and Investec are witnessing similar trends among their clientele. Standard Bank previously reported a 121% increase in South Africans opening offshore bank accounts since June 2023, driven by domestic economic uncertainties.
Bridgette Kruger, head of private banking clients at Standard Bank, said clients diversify across borders to protect themselves from unforeseen events and uncertainty by placing some of their wealth offshore.
Investec said more than 11,500 of its clients had opened private banking accounts in the UK, attributing this trend to family ties and the rising number of South Africans studying in the UK.
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