South Africans diversify insurance cover

South Africans are increasingly opting for life insurance cover in U.S. dollars, driven by the need to hedge against currency volatility, manage global liabilities, and address rising offshore medical and education costs. The Discovery Life 2024 Dollar Life research paper sheds light on this trend, showing a remarkable surge in the demand for offshore risk protection among South Africans over the past decade. Gareth Friedlander, Deputy CEO of Discovery Life, discussed the key findings in an exclusive interview with CNBC Africa. The research paper marks the ten-year anniversary of the Discovery International business and the Dollar Life plan, highlighting a 20% year-on-year growth in the last five years, doubling premium income over the previous five years. This growth underscores the growing need for diversified currency risk protection among South Africans. The paper emphasizes the importance of securing insurance cover in hard currency to retain the purchasing power of funds in the event of a life-changing occurrence. With recent events such as the pandemic and geopolitical tensions increasing volatility, there is a heightened awareness of the risks associated with currency fluctuations. Volatility can lead to a significant loss in buying power if insurance payouts are in local currency during turbulent times. To mitigate this risk, individuals are advised to diversify their insurance cover by allocating a percentage offshore. The research paper revealed that 63% of offshore clients also hold local policies, with 40% of their cover being allocated offshore. This balanced approach ensures effective hedging against currency volatility and reinforces the importance of diversification. In addition to currency hedging, the trend towards offshore insurance is also driven by specific needs related to healthcare and education. Medical expenses, especially for advanced treatments, are often best covered in dollars due to the global nature of cutting-edge medical procedures. With an increasing number of South Africans seeking medical treatment overseas, having insurance cover in dollars ensures access to top-quality healthcare without financial constraints. Similarly, the globalization of education has led to a growing number of students studying abroad. Parents are increasingly opting for global education protection products to safeguard their child's education journey, whether locally or at international institutions. The research paper revealed a strong correlation between offshore allocations and local policies, with 40% being the average allocation for offshore cover. This strategic allocation reflects advisors' efforts to diversify clients' portfolios while considering future dollar-based needs. As clients become more globally diversified, it is anticipated that the demand for offshore cover will continue to rise. The long-term nature of risk planning emphasizes the importance of preparing for potential global events that may impact individuals or their families in the coming decades. With the increasing trends of globalization, diversified currency risk protection is becoming a vital component of financial planning for South Africans. Gareth Friedlander concluded the interview by highlighting the essential role of diversification and effective risk management in ensuring financial security for families over the long term.