More South Africans opt for life cover in U.S. dollars, according to latest data from Discovery Life

Johannesburg, July 16, 2024 – Marking the 10-year anniversary of Discovery Life’s Dollar Life Plan, Discovery Life released its 2024 Dollar Life research paper at a media roundtable in Sandton today. This important research examines how South Africans are diversifying their risk cover to include life insurance that pays out offshore, in U.S. dollars.

“This latest round of in-depth research looks at the growing demand for global risk protection among South Africans, in particular offshore policies that meet the needs of ever-more global citizens,” said Gareth Friedlander, Discovery Life Deputy CEO.

The research revealed that, since the Dollar Life Plan’s inception, the year-on-year increase in premium income from offshore risk planning has averaged over 20% growth per year. Premium volumes have more than doubled over the last five years when compared to the first five years.

“Traditionally, risk cover such as life insurance was held locally, through rand denominated policies, but, as with investing, more South Africans are holding a mix of local and offshore portfolios to hedge against currency volatility,” commented Friedlander.

“South Africa is in the top 30% of the KOF Globalisation Index – which measures how globalised a country is – with the rest of that group predominantly first world countries. With increasing numbers of people living and studying overseas – or even working remotely but living locally – South Africans are more globalised than ever and seeking ways to diversify their risk cover. They are realising the importance of risk protection that meets their offshore needs – from business ventures to protecting children’s education, and even for accessing specialised medical care. Importantly, they need risk cover that pays out in a stable currency, anywhere in the world,” added Friedlander.

Diversified risk protection that hedges against currency volatility

“The paper reveals that two in three Dollar Life policyholders also hold local policies, and where clients have both, they hold 40% in offshore cover,” noted Friedlander. “This tracks with many South Africans being globally interconnected and having both local and offshore liabilities and responsibilities. For example, more people are embracing opportunities abroad while maintaining connections to home. Or, due to South Africa’s low cost of living compared to Europe and North America, locals are returning home or based locally, while maintaining overseas interests.”

This globalised way of living requires currency-matching and hedging solutions. The research shows that in the 10 years to January 2024, the U.S. dollar strengthened by a cumulative 68% against the rand while the change would have only been expected to be 25% based on inflation differentials. To demonstrate this impact, a client who elected to have both local and Dollar Life Plans of the same value in 2014, would effectively have 35% more cover under their Dollar Life Plan compared to their local plan today.

“This is significant for anyone who wishes to maintain the purchasing power of their life insurance payout in the future,” said Friedlander.

Risk cover that matches growing offshore medical and education costs

“We see a very real need for clients to match their highly specialised medical needs. Complex treatments for cancer can cost in excess of R1 million a year and medical devices can cost almost R2 million, of which three in every four devices are imported into South Africa. These costs are growing at a much faster rate than South African inflation as a lot of research and development occurs internationally,” said Friedlander.

“Similarly, there’s a strong demand from clients to hedge against education costs where there is the possibility of a child studying overseas. For the last five years, at least 12,000 South African students have been studying abroad every year and education inflation is consistently around 2.5% higher than normal inflation, locally and abroad.

“These are all important considerations for any South African considering risk cover, whether it’s for severe illness, their children’s education, or to leave a legacy. While local life insurance offers protection for these life-changing events, a Dollar Life Plan differentiates by covering clients for any global aspirations all while maintaining the buying power of their payout,” commented Friedlander.

Harry Joffe, Discovery Life’s Head of Legal Services, added that the Dollar Life Plan uses the Single Discretionary Allowance (SDA) to fund the premiums. This allows South African tax residents to take up to R1 million offshore each year without South African Reserve Bank clearance. There is also an option to pay premiums directly in US dollars from offshore, for those who are no longer a tax resident in South Africa. This is part of a series of upgrades to the Dollar Life Plan to assist mobile South Africans.

“The SDA simplifies the admin involved and helps policyholders avoid South African forex restrictions at the time of payout of proceeds, as this policy is already based offshore, ensuring they receive the full value of their payout without the risk of forex complications or any tax implications,” said Joffe.

Accessible and affordable offshore diversification

“There’s a misconception that offshore products are only for high-net-worth individuals,” says Friedlander. “This is understandable; for offshore investing, people often need a large lump-sum to meet the minimum investment. However, many people are unaware that offshore risk protection, like the Dollar Life Plan, is possibly the most affordable method of diversifying one’s financial plan.”

According to the research, the current average premium across new local and offshore risk policies is R1,750. With the Dollar Life Plan’s minimum monthly premium spend requirement of just $50 (R900), this type of cover is one of the most accessible ways for people to enter the offshore financial world. Discovery Life has also found that 3-in-10 Dollar Life Plans have a premium of $100 or less, which indicates a large portion of these policies are taking advantage of this diversification opportunity without spending more than local policyholders.

“The bottom line is that we now live in an incredibly interconnected world, and you don’t know where you’ll end up,” adds Friedlander. “Affordable and accessible life insurance - that pays out in dollars - helps to future-proof whatever responsibilities, liabilities, or aspirations our clients have.”

Note to editors:

• The Discovery Life Dollar Life plan is an offshore life insurance policy that pays out, offshore, in U.S. dollars in the event of the policyholder’s death, disability, or severe illness.
• The roundtable panel included Discovery Life’s Deputy CEO Gareth Friedlander, Head of Legal Services Harry Joffe, and Kashmeera Kanji, Head of Market Analytics and R&D.
• A recording of the roundtable webinar is available upon request.

ENDS