THE Covid-19 pandemic has given impetus to the dominance of funeral assurance products in the life assurance product line, as the increase in mortality risk has resulted in most people seeking funeral cover, The NewsHawks has learnt.
Many economic sectors in Zimbabwe have felt the full impact of the Covid-19 pandemic, resulting in some companies downsizing or closing shop due to subdued economic activities.
But according to an Insurance and Pensions Commission (Ipec) first-quarter report, the pandemic has been a blessing in disguise for the funeral assurance sector.
For the quarter ended 31 March 2021, Gross Premium Written (GPW) by direct life assurers grew by 492% in nominal terms from ZW$577.68 million reported for the quarter ended 31 March 2020 to ZW$3.42 billion.
“Growth in GPW was mainly attributable to significant increase in premiums from funeral assurance and group life assurance business. The increase in premiums in these classes may be attributable to premiums tracking inflation and an increase in the uptake of these products on the back of the Covid-19 pandemic,” the report reads in part.
Based on inflation-adjusted figures, the growth in GPW was above the year-on-year inflation of 241% as the industry recorded inflation-adjusted growth of 74% for the quarter under review as compared to the same period last year.
“The commission continues to encourage players to leverage on modern technology to develop both new innovative products that are relevant to their clients’ needs and new distribution channels that enable access by the marginalised sectors of the economy,” it said.
“This is particularly important with the continued uncertainty on the containment of the Covid-19 pandemic.”
In terms of the source of business, the life assurance sector’s GPW was skewed towards recurring business, which accounted for 97% of total business written, while new business accounted for the remaining 3% during the review quarter.
“The increase in business written by the sector also means that technical liabilities of the sector should accordingly increase in tandem with increased business. The Commission, therefore, encourages players to continuously review their reserving methods, to ensure the adequacy of technical liabilities at all times,” Ipec said.
Ipec said players should maintain prudent asset liability matches on their balance sheets.
It said funeral assurance products have remained more popular than life assurance products on the Zimbabwean insurance market due to the products’ declined benefit promise given the persistent hyperinflationary environment.
Thus, funeral assurance products continued to dominate life assurance product lines, contributing 85.02% of the total GPW for the quarter under review.
Ipec said there is a need for life assurance players to be innovative in the development of term assurance, endowment and whole life products to match policyholder needs in the wake of the dynamic macro-economic environment and evolving policyholder needs to remain relevant.
In the period under review, the life assurance sector reported a total of 104 678 not taken up (NTU) policies with a total gross premium of ZW$90.33 million, up from 5 826 policies in the comparative period in 2020.
As such, premiums lost on NTU policies constituted 2.64% of total GPW for the quarter.
“The increase in not taken up policies is attributed to the negative effects of the Covid-19-induced lockdown and restrictions as some policyholders most likely faced challenges to honour their premium payments,” it said.
The NTU may also be attributable to improperly trained sales staff mis-selling the products, Ipec said.
For the quarter under review, Ipec said the life assurance sector had a total of 1.98 million lapsable policies, out of which 177 228 policies lapsed, translating to a lapse ratio of 10.1%.
The lapse ratio of 10.1%, Ipec said, compares unfavourably to the lapse ratio of 3.57% recorded for the comparative period last year.
However, the abnormally high lapse ratio of 10.1% may be attributable to a general decline in the disposable incomes because of Covid-19-induced lockdowns and restrictions, it said.
The sector is dominated by Nyaradzo, which controls 60.82% market share in terms of GPW, while other players share the remaining 39.18%.
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