SA insurers weather the Covid storm
Industry raised significant reserves
South Africa’s life insurance industry is set to emerge stronger from the Covid-19 pandemic, according to a study by professional services firm PWC.
The PWC Life Insurance Analysis 2021 report provides an insight into the country’s life insurers and presents the combined results of Discovery Holdings, Liberty Holdings, Momentum Metropolitan Holdings, Old Mutual and Sanlam.
The results of the analysis found that the pandemic and the current economic climate resulted in the top five insurers losing R8-billion of value last year, compared with R32-billion created in 2019.
The study further shows that the insurers posted a total comprehensive loss of R870-million, compared with a total comprehensive profit of R22.1-billion reported in 2019.
However, PWC is of the view that the insurers will emerge stronger from the pandemic.
Alsue du Preez, an insurance leader for PWC Africa, said the strength and resilience of capital management strategies and balance sheets were evident in the reported results of the insurers.
“While some of these risks can materialise independently, the Covid-19 pandemic demonstrated what can happen when adverse experiences occur in all these areas. Life insurers are both bearers and expert managers of these risks, and their results for 2020 demonstrate how they have performed during an unprecedented and extremely challenging year,” Du Preez said.
“In response to the impact of Covid-19, the companies raised significant reserves. By far the biggest contributor to the R15-billion increase in reserves relates to expected mortality claims over the near term. Insurers also impaired non-financial assets [investments in associates, goodwill and other intangible assets] to the value of R17.1-billion.”
The local life insurance industry has long been plagued by cumbersome, undesirable legacy systems that ultimately impact the value delivered to policyholders. Coupled with inherently complex regulatory requirements, inefficient systems not only impact customer services and the ability to effectively tailor products for the individual needs of South Africans, but the inefficiencies create layers of cost that ultimately fall on the customer.
In an attempt to alleviate this and drive much-needed value for South African life insurance policyholders, local software development firm Comotion Business Solutions has partnered with pioneering local life insurance provider Elevate to create a next-generation insurance offering centred around an innovative, fully automated digital platform.
“The cost of inefficiency in the life insurance sector is substantial. As an example, MCKinsey found that automation can reduce the cost of a claims journey by as much as 30% – imagine delivering that value back to stakeholders,” said Tim Vieyra, the managing director of Comotion.
Du Preez said accelerating digital investment such as direct-to-customer engagements, automated advice, digital underwriting and cloud and cybersecurity coverage capabilities is seen as a key driver of growth to achieve recovery.