A significant portion of insurance policyholders—often a majority—are either overpaying for their coverage or they are underinsured or both. Here's a breakdown based on available data and trends:

In the South African short-term insurance market, underinsurance and overpayment are widespread issues, particularly for property and asset coverage:

  1. Underinsurance in Short-Term Policies
    Many South Africans insure their assets, such as homes, for market value instead of replacement value. This can create significant shortfalls in claims.
  2. Overpayment on Premiums
    Policyholders who fail to compare insurance options or negotiate regularly tend to overpay. Research shows that shopping around for insurance can save up to 30% annually, yet 20-40% of South Africans renew policies without reviewing their coverage or exploring alternatives.
  3. Causes of Underinsurance and Overpayment
    • Lack of Policy Reviews: Many fail to update coverage to reflect asset improvements or increased values.
    • Inertia in Shopping Around: Automatic renewals often result in higher premiums without additional benefits.
    • Poor Broker Communication: Limited proactive engagement from brokers leads to coverage gaps and unoptimized premiums.

These issues highlight the importance of conducting annual reviews of short-term insurance policies to ensure adequate protection at competitive rates.

 

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