Capitec Joins the Insurance Boom, Launching Life Cover Product in South Africa

South Africa’s insurance industry is proving highly profitable, and Capitec, the country’s largest bank by client numbers, is entering the fray. Following a trend of major insurers posting significant profits, Capitec launched its own life insurance product on June 9th, 2024.

Life insurance offers a safety net for policyholders’ families in the event of their death. Insurance companies collect premiums from policyholders and use that money to cover claims, operating costs, and generate profit. The key to profitability lies in attracting a large pool of policyholders and retaining them over time. This strategy allows insurers to leverage the fact that not everyone will claim, using the unclaimed premiums to pay out valid claims.

Sanlam, a major South African insurer, recently reported headline earnings of R14.47 billion, a 49% increase. Other industry giants like Old Mutual, Discovery, and Momentum have also posted impressive profits.

Seeing the potential, Capitec is now offering life cover through its app and branches. This new product allows customers to choose from a variety of payout options, including funding for children’s needs, a monthly income for beneficiaries, a lump sum payment, or a combination of all three.

Capitec is also transitioning its existing credit life insurance policies, roughly 550,000 in total, to its own insurance license. The transfer is expected to be completed by July or August of 2025. Additionally, Capitec has ended its previous partnership with Sanlam for funeral cover and will now offer these policies directly as well.

Capitec’s insurance business has already shown strong performance. The company’s profit after tax for insurance grew 12% to R3.1 billion in the last financial year. In the funeral cover market, Capitec boasts an impressive 35% market share for new customers, currently providing coverage to 12 million people.

This move by Capitec indicates a growing trend within South Africa’s financial sector, with major players recognizing the profitability of the insurance market. With the launch of its life cover product, Capitec is well-positioned to capture a significant share of this lucrative market.