Long term insurance premiums grow by 89.19%
MBABANE - The Gross Written Premiums (GWP) for long term insurances (LTI) as at the end of the second quarter of 2023 were valued at E535.51 million.
This indicated a cumulative growth of 89.18 per cent from E283.06 million in the previous quarter.
Gross written premium refers to the total amount of money an insurer collects from its customers in exchange for insurance policies. It is the sum of all premiums charged regardless of the risk the insurer takes. The gross written premium is calculated before any expenses and commissions are taken into account.
According to the Financial Services Regulatory Authority (FSRA) quarterly bulletin for the second quarter of 2022/23 financial year, annuities experienced the largest increase with a 158.25 per cent rise, followed by credit life with a 132.39 per cent increase.
Payments
An annuity is a contract between a client and an insurance company that requires the insurer to make payments to the client, either immediately or in the future.
Meanwhile, disability insurance premiums increased by 105.73 per cent, while endowment and funeral insurance showed increases of 113.77 per cent and 83.89 per cent, respectively. When comparing year-on-year changes, the pattern is slightly different.
Funeral insurance products showed the highest yearly increase of 18.20 per cent, followed by disability insurance at 16.32 per cent and group life with a 14.53 per cent increase.
However, individual life insurance premiums decreased by 1.82 per cent and unit linked savings experienced a significant decline of 34.23 per cent. Endowment insurance and unit linked savings insurance also realised year on year declines of 21.66 per cent and 34.01 per cent respectively.
Overall, annuities and credit life insurance premiums have experienced significant growth both quarter-on-quarter and year-on-year. Disability insurance also demonstrated strong growth in both periods. However, endowment and unit linked savings have seen declines, particularly in the year-on-year comparison.
Funeral and group life insurance have had consistent growth, although the growth rate varies between the two periods. The market dynamics, consumer preferences, and economic factors likely play significant roles in determining these premium changes, especially the renewed preference or interest in retirement annuities offered by the insurers.
Market
It was reported that consistent with the previous quarter and year-on-year comparison, ESRIC and Liberty are still the dominant players in terms of premiums written, jointly accounting for 53.21 per cent of the industry GWP. However, these insurers lost a 5.79 per cent market share on-year-on-year which was subsequently gained by Old Mutual, Orchard and Safrican. The other players, United Life, Finsure and Oracle market shares remained relatively stable with no significant change.
Meanwhile, the LTI sector’s claim and policy benefits continue to improve as it declined by 17.68 per cent quarter-on-quarter and by 13.11 per cent year-on- year. The yearly decline was mainly due to the decrease in claims relating to disability, funeral and group life insurance which declined by 77.67, 56.70 and 54.89 per cent respectively.
Inverse to the decline in these classes of business, claims on endowment, credit life and individual life, increased by 121.14, 35.14 and 22.44 per cent respectively.
Claims
The increase in endowment claims could indicate an increase in maturing policies during the period under review, while the increases in credit life and individual life covers are indicative of an increase in death rates amongst the affluent members of society with access to credit life and life insurance cover.
Withdrawals or claims on retirement funds continue to be the highest across the four quarters under comparison continuing to show the lack of persistency in this class of business.
In terms of the claims ratio, on a quarter-on-quarter the ratio was relatively stable however a significant increase of 26.13 percentage points on a year-on-year was observed which was mainly driven by an increase in premiums resulting from the increase in new business and the annual premium increases on most life policies.