Insurance can be highly profitable, with Capitec embracing the trend by launching its own life insurance product.

According to Sanlam’s explanation of Life Insurance, insurers have to be profitable, and they do so by obtaining a large number of policies at the lowest possible cost and keeping those policies for as long as possible (retention).

Insurance companies make their money from the premiums that they charge in exchange for coverage.

These premiums are used to pay out claims, cover the cost of attracting new clients, pay for the cost of having people tested as part of the underwriting process, and for their expenses like paying their staff’s salaries and office rentals. The leftover amounts are the cover.

Insurers rely on the fact that not all of their clients will claim, so they try to sell as many policies as possible. The money from the clients who do not claim is then used to pay for the clients who do.

Insurance is a highly lucrative business, with South Africa’s biggest listed life insurers posting billions in profits in their latest results

The biggest life insurers in South Africa have posted multi-billion rand profits in their latest results:

Insurer Headline Earnings Change
Sanlam R14 467 million (Full-year) +49%
Old Mutual R7 380 million (Full-year) +26%
Discovery R3 260 million (Interim)
Momentum R2 424 million (Interim) +42%

South Africa’s largest bank by client numbers has caught onto this trend and is forging ahead with underwriting its own life and funeral insurance products via its own licence.

Capitec’s Life Cover is now available on the Capitec App or via a branch after officially launching on 9 June

Customers will be able to pay for their children’s needs (an umbrella trust), a monthly income for a period of 24 months, a lump sum, or a combination of all 3 payout options.

In the group’s latest results for the year ended 29 February 2024, the group said that the transfer of the credit life of roughly 550,000 insurance policies from the Guardrisk cell captive to Capitec Life Limited is expected to be completed in the second half of 2025 financial year (July or August).

The group will also write funeral policies on its own insurance licence after cancelling a deal with Sanlam.

For the last financial year, Capitec’s total profit after tax for its insurance business grew by 12% to R3.1 billion.

In terms of funeral coverage, Capitec covered 12 million people and had a 35% market share of new customers.