South Africa's insurance sector is closely aligned with global themes such as volatility, cost pressure, efficiency, AI, competition and the hunt for new growth. But its challenges are intensified by domestic realities such as energy instability, slower economic growth and complex regulatory change, says international professional services firm EY.
Drawing on its “2026 Global Insurance Outlook”, EY says that reduced load shedding has eased some disruption in South Africa, yet ageing infrastructure continues to drive higher property and business interruption claims, particularly across midsized commercial clients.
Claims costs remain elevated, driven by inflation in materials, labour and imported vehicle parts. Currency swings further complicate claims provisioning, while rising premiums prompt policyholders to reduce cover, fuelling underinsurance and slowing new business.
Regulatory reform and the potential implications of National Health Insurance add operational cost and uncertainty. Meanwhile, climate-driven catastrophe events, such as KZN flooding, coastal storms and wildfires, continue to raise reinsurance costs and squeeze underwriting appetite.
These dynamics demand sharper portfolio steering, more precise capital allocation and more robust scenario testing to improve real-time decision-making.
Margin pressure and technology-enabled operating models
Globally, insurers are redesigning their operating models and moving away from traditional cost-cutting and towards automation, managed services and modern platforms. South African insurers face similar pressures.
Claims inflation remains a major challenge. In motor, supply chain constraints and parts availability, including pressure arising from the rapid rise of Chinese brands, influence both cost and customer experience. Medical and health-related inflation affects group risk and medical schemes, while a hardening reinsurance market raises net retentions in catastrophe-exposed portfolios.
Insurers are responding by adopting leaner models: automating claims and underwriting, deploying AI and analytics for pricing and risk selection, and expanding digital servicing through virtual agents. This shift requires new digital skills and is reshaping workforce profiles, echoing the global trend.
AI: high expectations, modest scale
The global market is reassessing AI. Despite investment, many insurers have not scaled AI beyond operational efficiencies due to legacy systems, fragmented data and architectural complexity. South Africa is in a similar stage of maturity.
AI use cases exist (e.g. chatbots, OCR, fraud detection, etc.), but remain largely functional rather than enterprisewide. Also, data quality challenges persist, especially in older bank assurance systems, while consumers increasingly expect AI-enabled service experiences becoming shaped by, and more common place in other industries.
Where South Africa stands out, is in InsurTech collaboration, particularly in microinsurance, embedded finance and mobile-driven models. However, scaling advanced underwriting models, behaviour-led pricing and agentic AI remain limited.
Success now depends as much on defining a clear enterprise vision for AI as on the technology itself and on bringing teams along the journey.
A shifting competitive landscape
Globally, private equity-backed insurers, alternative capital and non-traditional entrants are reshaping the competitive environment. South Africa has not seen the same influx of alternative capital, but parallel trends are evident.
Broker consolidation is accelerating, strengthening procurement power and influencing pricing. Banks continue to expand their insurance ecosystems, while retailers and mobile networks broaden their reach into funeral, device and micro short-term cover. Global reinsurers are also increasing their influence on local pricing, capacity and innovation.
In South Africa, rather than alternative capital, digital-first players and broker consolidation are the primary forces reshaping competition.
Pursuit of growth
Worldwide, growth is coming from M&A, specialty lines, emerging markets and embedded insurance models. South Africa reflects this shift.
Insurers are expanding into specialty lines such as cyber, renewable energy, and engineering risk. Regional expansion into emerging markets continues, often through joint ventures or partnerships, such as Sanlam’s alliance with Allianz and Discovery’s global Vitality partnerships. Embedded insurance models, retail and fintech collaborations, and wellness-oriented ecosystem plays are growing quickly.
Customer centricity, trust and regulation
Globally, customer trust is becoming a strategic differentiator. Insurers are redesigning products to be more modular, transparent and lifestage-aligned, supported by AI-enabled service.
South Africa’s regulatory framework reinforces this shift. The "Treating Customers Fairly" framework and the Conduct of Financial Institutions Bill sharpen expectations of fairness, value for money and disclosures. Local insurers are responding with simpler products, clearer communication and digital claims experiences that support transparency and self service.