Why South Africans are over-insured, under-protected – and what needs to change

Nearly two-thirds of South African household income is swallowed by debt repayments. Yet insurance penetration remains alarmingly low at just 11.54% in 2024, with the bulk of policies being funeral cover. Life, health, and asset insurance lag far behind, while many consumers hold overlapping or unsuitable financial products, often without fully understanding what they’re paying for.

According to an industry expert, the problem is a broken financial advice model that starts with products instead of people, leaving households unprotected and underserved.

Multilink CEO Pedri Reyneke notes this is the result of a “product-first” culture. “For decades, the industry has had it backwards. Too often the conversation begins with the product – be it life cover, an investment, or a retirement annuity – rather than the person. This leads to mismatched solutions, hidden terms, and inflated commissions that don’t serve the client’s best interests.”

In a commission-driven environment, complex jargon and high-pressure sales tactics dominate. The result is that South Africans are over-insured, under-invested, and trapped in debt cycles. Reyneke argues the solution is simple: advice first, product second.

He explains that the first meeting with a good advisor should be about listening, not pushing paperwork. “A proper process starts with a detailed needs analysis, assessing existing products, and setting financial goals. Only after that should quotes be sourced, and clients should see all the results – even the less favourable ones. They should also be encouraged to take time before committing. If the advice is truly right for them, there’s no need for pressure.”

Sometimes, that advice might mean telling a client to pay off debt instead of buying a policy, even if it means no commission in the short term.

Take, for example, a client who divorces later in life. Suddenly faced with reduced retirement savings and significant debt, the natural industry response might be to sell more insurance. By contrast, an advice-led approach might prioritise paying off high-interest credit cards, restructuring investments to save on tax, and setting a realistic retirement age.

In one such case, he recalls recommending that a client extend her working life to 70 to protect her income. “It’s about building a plan that works for the person and adjusting it when circumstances change. That’s real financial advice.”

For Reyneke, South Africa’s challenges are as much about systemic issues as they are about personal habits. Low financial literacy, a culture of instant gratification, and an industry designed for sales rather than sustainability are all at play.

“We should be teaching financial basics in schools, for example how interest works or what bank fees are, making product information so clear that a Grade 9 learner could understand it.”

His message to consumers is clear: “If your advisor can’t explain it simply, they either don’t understand it or they don’t want you to. And if they lead with the product, they’re not an advisor and are in it for the wrong reasons.”

As the cost of living rises and financial pressures mount, the need for trustworthy, strategy-first advice has never been greater.

“South Africans don’t just need better products – they need advisors who put the person before the policy. That’s the standard we live by at Multilink.”

For more information, visit https://www.multilinkfs.co.za/.