The buzzword circuit for life insurance officially has a new acronym: MAROUN.
MAROUN’s is not a misspelling of a colour nobody wears but, rather, Discovery’s snappy new terms for the concerning insurance gap faced by millennials. Succinctly: ‘Millennials At Risk of Underinsurance.’
The acronym was the title of Discovery’s media roundtable held in its new Sandton offices yesterday, at which I tried (and most likely failed) to look suitably under 30.
“Millennials represent more than 27 percent of the South African population – millennials in the workforce being those between 18 and 34 years old – and a serious problem we currently have is that more than half of South African millennials are currently unemployed. According to Deloitte research, yet in 2025 these men and women will represent over 75 percent of the working population.”
This three quarters of the working world are a staggering R9 trillion underinsured here in SA, according to ASISA’s 2016 survey on the insurance gap. In fact, at 74 percent, it’s an estimated three times higher than the gap suffered by 50-something’s.
According to Friedlander, “by age 35, most millennials will have worked more than 5 different jobs and 46 percent of them have absolutely zero savings, with only 35 percent saving for the long term. In fact, 55 percent of millennials say they cannot take out life insurance due to affordability constraints.”
Now, as Maya Fischer-French pointed out, it is difficult to distinguish whether or not this is a ‘millennial thing’ or simply a young people thing – everyone knows that under 30 year-olds tend to feel invincible, have no money and think long-term savings mean travel fund for next year. However, the whole ‘75 percent of the working population’ figure is new, and says volumes about the potential future for our already deplorable savings culture in South Africa.
The Discovery graphs painted this unaffordability issue as somewhat ironic. They worked out that 25 year-olds, for example, have double the ‘present value future income’ that a 45 year-old has. Simply put, this means younger earners have more to lose than those who’ve worked for longer. He/she/they haven’t made their millions and there is more time for more things to go wrong before it does than for other twenty years further down the career path. Assuming that we’re talking about a really flush 20-something (with much less millennial ideas of working) then, the tendency to insure a car worth R200 000 is ironic, according to Discovery, when loss of future income through disability or convalescence means a potential loss of up to R18 million – the salaries you won’t get for the rest of your life.
At least a few are going to face this, according to those on the frontline of Discovery’s claims, particularly millennials like myself that are closer to the 30-year-old watermark than 20. Discovery financial advisor Claire van Wyk said during the panel discussion section of the presentation that “of all my clients who have had strokes this year, all of them have been under 40 years old.” Ouch.
With a high percentage needing it and a very low percentage taking it out, what is the industry going to do about life insurance?
“It’s about the complex meeting of needs at a very affordable level. We realised Discovery, with our shared benefit model, was uniquely placed to offer a solution,” said Friedlander. “We knew that millennials were never going to take out life insurance for life insurance’s sake, and we also knew that a lot of claims were due to controllable causes like driving behaviour. So, in mid-March, we launched a new product called the Smart Life plan which is flexible and offers things like travel protection, sports injury cover, up to R20 000 funeral cover for each parent and an income continuation benefit with its promotion tracker tool. All for R100 per month. We also added on access to the Vitality program for R40 a month, giving weekly rewards for good behaviour with things like airtime and data as a kind of ‘benevolent bribe’ to reduce debt coming from avoidable accidents.”
Apparently, this really works. When I asked him outright what the uptake figures were, Friedlander smiled wide.
“It’s been superb. It’s pretty fresh, we launched in March and usually you have a lag time with these things. But since it’s gone we’ve seen sales of life insurance to under 30 year-olds increase by 15 to 18 percent without any marketing or engagement. And once we do start making people aware of this new product we expect that to increase even more.”
Well there you have it, millennials. A Discovery life insurance product just for you. Live long and prosper.