Insurance market stagnant 

SHARE   |   Sunday, 18 January 2015   |   By Keitebe Kgosikebatho
Oaitse Ramasedi, NBIFIRA CEO (L) Oaitse Ramasedi, NBIFIRA CEO (L)

• Penetration stands at 3% compared to 9% in Namibia and 6.5% in Mauritius 

SEE ALSO:

• NBFIRA worried as total liabilities on premiums held by insurance brokers jump to P320m 

SEE ALSO:

The overdue balance payables by some insurance brokers to insurers continue to have an adverse impact on the cash flow of insurers and inconvenience policy holders at claim stage.

According to the Non-Bank Financial  Institutions Regulatory Authority  (NBFIRA)  2014 annual report  in terms of  the insurance  Industry Act section  57 read with  regulation 18 of the Insurance  Industry Regulations, insurance brokers  are liable to  insurers  for all premiums  collected  on insurers  behalf up to a  period of  60 days  when such  premiums  become  due  for remittance  over to insurers.

SEE ALSO:

At the time of  writing the annual report, NBFIRA reports that  the total liabilities on premiums  held by insurance brokers  was P320 million, which is  double  the balance held in the prior year (P147 million).

According to experts within the Insurance industry, brokers usually hold onto the premium funds to maximise returns for themselves before the same can be paid out to insurers. To counter this, some jurisdictions have passed regulations to the effect that premium is directly paid to an insurer and it is the insurer that pays out brokerage.

SEE ALSO:

According to the report, the insurance penetration rate in the country continues to be stagnant and relatively low at 3 percent of the Gross Domestic Product, compared with that of similar size economies such as Namibia and Mauritius, which have insurance penetration rates of 9% and 6.5% respectively. “ This low insurance penetration  rate could be attributed  to among  other factors, a significant untapped insurance market, lack of innovative and differentiated insurance products and in some instances customer service delivery, which does not meet  policyholder’s expectations, as well as limited consumer education.

The report, however, states that during the period the insurance market (Life & Non-Life) recorded a combined gross written premiums income of P3.74 billion, representing an increase of 1.6% from the prior year. The Life Insurance sector, according to the report, contributed  68%  of this premium income representing  P2.56 billion worth  of the combined  gross  premium written, while the  non-life sector  contributed  32 %  of the premium income representing P1.18 billion.

SEE ALSO:

Notably during the year under review, both life and Non-Life insurance sectors showed a stunted growth rate of only 1.25% compared to 19 %in the previous year, while a marginal growth of 2.3 % was also recorded for the non-life insurance sector. This marginal growth could be attributed to increased competition and hard economic pressure in the sector.

During the reporting year, according to the report, the insurance market ceded P525 million worth of premiums through reinsurance and co-insurance arrangements, with P22.2 million of general insurance business placed with local reinsurers. This  resulted in a net  income after tax of P608 million for the insurance market  after meeting  total incurred claims of P1.61 billion as compared to P1.49 billion in 2012. It is further reported that the gross written premium, which was distributed through insurance brokers stood at 41 %, representing P1.55 billion of premiums written through this distribution channel. As a result, the combined total generated revenue for insurance brokers during the period under review was P237 million earned through other revenue streams such as risk management related fees. 



Related news