Vitalis Group SA Business Plan › Section 3 › South African Insurance Industry Analysis

3.1 Industry Structure and Scale

The South African insurance industry is the largest and most
developed on the African continent. According to the Prudential
Authority’s 2024 Annual Report and the latest Swiss Re Sigma study,
gross written premium reached approximately ZAR 581 billion in 2024,
equivalent to 13.7% of GDP — a level comparable to mature economies such
as the United Kingdom and the United States, and materially ahead of
regional peers.

The industry comprises three principal segments — long-term (life)
insurance, short-term (non-life) insurance, and medical schemes — each
of which is regulated by a distinct framework but increasingly
converging at the customer level. Within each segment, market structure
is meaningfully concentrated: the top five players control more than 70%
of premium in long-term insurance and more than 60% in short-term
insurance.

Figure 3.1

Gross written premium has grown at a compound annual growth rate
(CAGR) of 5.4% over the 2019–2024 period, somewhat constrained by
depressed economic growth and load-shedding. We forecast a recovery to a
CAGR of 6.4% over the 2024–2029 forecast horizon, supported by
middle-class growth, embedded insurance penetration and product
innovation. By 2029, the industry is expected to exceed ZAR 800 billion
in gross written premium.

3.2 Industry Segments — Detail

3.2.1 Long-Term (Life) Insurance

Long-term insurance is regulated under the Long-term Insurance Act
(succeeded by the Insurance Act 2017) and supervised by the Prudential
Authority. The sector wrote approximately ZAR 410 billion in gross
premium in 2024, dominated by Old Mutual, Sanlam, Discovery Life,
Momentum Metropolitan Holdings and Liberty. Profitability has been
steady on an Embedded Value (EV) basis, though Value of New Business
(VNB) margins have compressed from 4.2% in 2018 to roughly 3.1% in 2024
as competition and lapse rates have intensified.

3.2.2 Short-Term (Non-Life) Insurance

Short-term insurance is dominated by motor and property risk, with
smaller pools of accident & health, marine, aviation, and commercial
lines. Gross premium reached approximately ZAR 145 billion in 2024.
Santam holds the leading market share, followed by Hollard, OUTsurance,
and Discovery Insure. Combined ratios have deteriorated from a 5-year
average of 92% to recent levels of 99–101%, driven by
load-shedding-related power-surge claims, severe weather events and
motor claim inflation.

3.2.3 Medical Schemes and Health Insurance

Medical schemes are regulated under a parallel framework (the Medical
Schemes Act, 1998) by the Council for Medical Schemes. The sector covers
approximately 9.7 million principal members and dependants — about 16%
of the population — and collected ZAR 240 billion in contributions in
2024. Discovery Health Medical Scheme is the largest by some margin (38%
market share), followed by GEMS, Bonitas and Momentum Health Solutions.
Demarcation regulations enacted in 2017 created a regulated space for
primary-care insurance products, opening the door to lower-cost gap and
primary health solutions.

3.3 Penetration: A Bifurcated Picture

The headline penetration figure conceals a deeply bifurcated market.
Insurance density (premium per capita) is high relative to global
emerging-market peers, but the bulk of premiums concentrate in the upper
LSM segments. A FinScope Consumer Survey conducted in 2024 found that
47% of working-age South African adults have no formal life or
short-term insurance product, and an additional 18% are under-insured
relative to their economic exposures.

Figure 3.2

3.4 Industry Profitability and Capital

Industry return on equity has been gradually compressing. For listed
composite insurers, return on embedded value averaged 12.4% in 2024
versus a 5-year average of 14.2%. Three structural forces explain this
compression:

• Cost-to-income elevation. Legacy systems consume
  18–22% of opex at the largest insurers; recent investments in
  modernisation have yet to drive efficiencies through to the bottom
  line.
• Loss ratio inflation. Motor and property loss
  ratios have risen due to vehicle theft, load-shedding-induced surge
  claims, and severe weather (notably the April 2022 KwaZulu-Natal floods,
  which produced more than ZAR 17 billion in insured losses).
• Capital intensity under SAM. The Solvency
  Assessment and Management (SAM) framework — South Africa’s adaptation of
  Solvency II — has materially increased capital requirements for certain
  risk pools.

3.5 Industry-Wide PESTLE Analysis

3.6 Porter’s Five Forces Assessment

The South African insurance industry’s structural attractiveness,
assessed against the classic five-forces framework, is moderate-to-good
for a well-positioned entrant. The summary scoring below reflects
management’s assessment, validated against independent industry analyst
commentary.

3.7 Industry Outlook

The medium-term outlook is constructive but uneven. Key themes:

• Digital natives gain share. Players with
  cloud-native platforms and direct digital channels (notably OUTsurance,
  Discovery, Naked, Pineapple) will continue to gain share at the expense
  of legacy carriers.
• Embedded insurance scales. Distribution through
  retailers, mobile network operators and fintechs is expected to add ZAR
  35–50 billion in incremental premium by 2030.
• Shared-value spreads. The success of Discovery’s
  Vitality has prompted multiple competitors (and global reinsurers) to
  develop behaviour-led products; the model is becoming an industry
  standard rather than a single-firm anomaly.
• Consolidation accelerates. Sub-scale players
  will increasingly be acquired or wound up. Two material transactions in
  the past 24 months reinforce this trajectory.
• Climate and ESG integration. Insurance pricing
  and reserving will increasingly internalise climate risk; ESG-aligned
  investment portfolios will become standard.

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