Life assurers NPW up 7% to $252 mln in Q3
HARARE – Life insurance companies net premium written grew 7% to $252 million from $237 million in the comparable year ago period but only three companies controlled 83% of the market. According to the Insurance and Pensions Commission’s report for the third quarter, the biggest players in the industry namely Old Mutual, Nyaradzo and First Mutual controlled $209 million or 83% of market NPW.
The report says industry Gross Premium Written also rose 7% to $257 million from $236 million. This was achieved via recurring business for the life insurers (organic growth) which grew to $256 million from $240 million under the review period. The industry’s top four life insurers accounted for $211 million or 82% of the GPW.
The biggest income stream for life companies in Zimbabwe remained fund business though it declined 11% to $91 million. Significant business growth was experienced on GLA and other products that rose by 123% to $43.6 million between September 2015 and September 2016. According to the report endowment and Pure Endowment products remained unattractive to the market as growth was negative.
“Such products require effective sales and marketing strategies in the wake of economic challenges facing the country.”
IPEC said life companies should embrace product innovation, product differentiation and market segmentation in order to ensure that meet customer expectation. The funeral business occupied large and significant market space as it grew by 5% to $81 million for the period under review while annuities rose 27% to $14 million. “In light of that, the Commission encourages businesses to diversify and service untapped markets especially the informal sector.”
Not taken up policies (NTU) amounted to 22, 444 policies, in the sum of $93, 713 as at 30 September 2016. The industry lapsed a total of 211, 594 policies as at 30 September 2016 resulting ina lapse ratio of 89.70% as compared to 973 policies that were lapsed previously.
The breakdown of industry expenditure in computation of combined ratio showed that claims expenses rose 30% to $146 million for the period under review. Operational expenditure grew by 29% to $57 million while commission grew from 5% to $12million in the period under review. Thus, the industry’s combined ratio was 85% from the previous 71%
Analysis of claims aged data showed that some players had ageing claims in excess of 121 days whilst the majority had claims creditors aged 30-60 days period. “We require players to pay claims timeously not only in terms of abiding with the law but also as best practice in terms of treating customers fairly.” In the period, life companies owed policy holders $4 million from $2 million in the third quarter of 2015. A total $0.7 million of its debtors are above 121 days against $2 million in same period in 2015. “This gave rise to a decline in debtors in that range by 70% which meant that effective policies were put forth by the insurers to recover and enforce payment by their clients.”
Industry-wide, uncollected premiums amounted to $6 million against $4 million in the third quarter of 2015 which meant a 35% increase in uncollected premiums. IPEC said this showed that the market is currently depressed by liquidity challenges as settlement of premiums is continuously a challenge. “The industry is
encouraged to ensure it comes up with stringent premium collection models so as to improve its average premium collection rates.”
Industry assets totaled $1.47 billion. Individually, properties grew by 11% to $560 million as at 30 September 2016 while equities declined by 13% to $348 million. Money markets also declined by 12% to $189 million. Life companies and life reassurers invested a total of U$180 million in prescribed assets which was 118% increase from $82 million that was invested by end of third quarter of 2015.
The industry attained prescribed assets status of 15% (net of capital) for the period as statutorily it is expected to at least meet 7.5% investment in prescribed assets
According to the report, all life companies except Getsure were fully compliant with minimum capital requirement of $2 million. The industry reported a capital to liability ratio of 17% against 21% reflected in the comparative period in 2015. Liquidity ratio was 441% while it was 193% in the comparative period under review.