Life Assurers Urged to Review Business Models

THE Insurance and Pensions Commission (Ipec) says the life assurance sector should re-engineer their business models considering the evolving operating environment, to increase their level of resilience to the ever-changing macroeconomic environment.

The country's life assurance sector as at June 30, 2021, was composed of 12 direct life assurance companies, four (4) composite reinsurance companies and 1 346 agents.

Ipec in its quarterly update report said the sector players also need to find sustainable solutions to the disruptions brought about by Covid-19.

"The Commission urges the life assurance sector to continuously improve their product offerings for traditional life assurance products and align them to the current business environment for them to remain relevant," the Commission said.

The Commission also encouraged sector players to leverage modern information and communication (ICT).

During the period under review, Gross Premium Written (GPW) by direct life assurance companies amounted to $7,4 billion, representing a nominal increase of 524 percent from $1,18 billion reported in the comparative period in 2020.

In inflation-adjusted terms, GPW experienced a growth of 202,27 percent to $3,57 billion indicating a strong growth in premiums above the 106,6 percent year-on-year inflation.

"Growth in nominal GPW for the half-year ended June 30, 2021 was mainly driven by increases in funeral assurance and Group Life Assurance business. Funeral and Group Life assurance business grew by 909,83 percent and 482,32 percent contributing premiums to the tune of $4,49 billion at 60,68 percent and $802 million at 10,84 percent respectively, to the total business by the life assurers," Ipec said.

As at the June 2021 period, all the eleven (11) life assurance companies who submitted their returns reported capital positions that complied with the prescribed minimum capital requirements of $75 million. The Commission urged the players to always maintain capital levels that are compliant with the required minimum capital requirements for the comfort of the insuring public and the insurers themselves in times of bad claims experience.

According to the Ipec report, direct life assurers had an asset base of $$55,1 billion, reflecting a 14 percent nominal growth as compared to $48,2 billion that was reported as at March 31, 2021.

Ipec said the growth in the asset base for the sector was mainly driven by large increases in the values of equity and property investments in response to exchange rate movements and inflation developments. The average prescribed assets ratio for life assurers stood at 0,326 percent and none of the Life Assurers was compliant with the minimum prescribed asset ratio of 15 percent.

"Players in the Life Assurance sector continue to struggle to comply with the required prescribed asset ratio, as growth in other assets continues to outstrip the growth in prescribed assets," reads part of the report.

The Commission noted that it is closely monitoring the implementation of the compliance plans of sector players to ensure compliance with prescribed asset requirements and now awaits the submission of prospective prescribed asset projects for consideration.

"In view of these developments, the Commission is set to escalate the enforcement of provisions of SI 206 of 2019 to cause compliance given the olive branch extended to the industry," said Ipec.

According to the report, the life assurance sector's GPW was skewed towards recurring business, which accounted for 97 percent of total business written, while new business accounted for the remaining three percent.

"New business remains low, pointing to the need for confidence restoration in the life assurance sector to encourage the uptake of life assurance policies," read part of the report.

To this end, the Commission encourages players to revamp their product specifications and business models.

In terms of business composition by product line, 78,98 percent of the total Gross Premium Written, was generated from funeral assurance business, followed by Group Life Assurance business (GLA) with 15,33 percent.