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As we all know, recent political events have led to the downgrade of SA’s investment-grade credit status. The decision was made by Standard & Poor’s (S & P) just this Monday, and sadly, it doesn’t look like it’s over yet.
S & P says their decision comes with a negative outlook, which means we could be downgraded further.
And unfortunately, this negatively affects the short-term insurance industry. Which means it could affect your car, home and business insurance policies.
The South African Insurance Association's (SAIA) concerns on S & P's downgrade
SAIA – who is the representative body for the short-term insurance industry, says the foreign-currency rating downgrade to BB+, is a big deal. It affects us now and will continue to affect us in the future. This downgrade has far-reaching and long-term negative implications for the economy and society at large.
This is because government’s ability to raise funds from foreign sources will be impacted. So, it’s going to become more expensive to pay off these foreign debts and interest rates will go up as we at PPS had previously predicted. Click hereto view that article
How South Africa’s economic downgrade will affect the short-term insurance industry
1. Increased costs of parts
The increased cost of foreign debt is bad news for short-term insurance. The rand will weaken against other major currencies. So, for example, if you bought a Renault Megane, where the replacement parts are bought overseas, these parts will suddenly be more expensive due to the exchange rate. Some consumers may unfortunately see a rise in their insurance premiums.
2. Increased cost of insurance products
Short-term insurance products could become less affordable. This means, South African homeowners could face additional financial risks if there’s damage to their homes.
3. Job losses
SAIA also says, we may well see less work in the short-term insurance industry. Motor body repairers, the building industry and others, will feel the pinch of potentially less work, leading to job losses.
Insure yourself against an unsure economic future
Many people are now tightening their belts to ease the effects of the junk status. This means it is more important than ever to get tailor-made insurance to suit your needs. So why settle for an insurer that offers you the usual, in these unusual times.
Do you have the insurance a professional like you deserves?
PPS STI, we’re committed to helping graduate professionals like you get the insurance you deserve. PPS is an authorised financial services provider – for exclusive short-term insurance solutions, contact us today.