South Africa Insurance Industry, Insurance Sector of South Africa
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Long Term Insurance Industry In South Africa
According to the Sixth Annual report on long term insurance, adjusted net premium income for primary insurers decreased by 6.7% during 2003 compared to an adjusted increase figure of 16.6% during 2002. (The adjustments made in 2003 were due to non-submission of returns by four insurance companies.) The decrease in premium income is attributable to the scepticism of policyholders, increased competition and poor persistency. Adjusted benefit payments decreased by 5.0% compared to a 23.8% increase for 2002. The excess of income over expenditure for primary insurers increased from R15.6 billion in 2002 to R24.7 billion in 2003. Assets showed a marginal increase of 5.4%. The increase in the assets of primary insurers was mainly due to the strengthening of equity markets. The ratio of assets to liabilities for primary insurers remained at 1.10.
For enhancing of public confidence in this industry follows transparency and disclosure, fair dealing, handling of consumers’ complaints and consumer education. The industry is
making a concerted effort to deal with these issues in terms of its broader role in society.
The terrible HIV/AIDS remains an important challenge in the present times.
The following are a number of vulnerabilities facing long-term insurers in South Africa:
- Asset quality
- Reinsurance and actuarial issues
- Management soundness
- Liquidity
- Sensitivity to market risk
The challenges faced by the long-term insurance industry are as follows:
- Increasing competition
- Strong local currency
- Low inflation and interest rates
- Poor persistency on recurring premium policies
The effective management of capital remains increasingly important to all insurers, with
many adopting new and innovative ways of improving the management of their capital.
| 9 Months ended Sept-2005 | |
| Net premiums Recurring R’M | 44 929 |
| Net premiums- Non-recurring R’M | 47 486 |
| Claims (as % of net premiums) | 103 |
| Commission (as % of net premiums) | 6 |
| Management Expenses (as % of net premiums) | 11 |
| Investment yield %* | 14 |
| Number of policies increase (yr to yr %) | 19 |
| Individual lapse %** | 25 |
| Individual termination %** | 19 |
| Individual contractual termination %** | 40 |
| Fund & group schemes Termination %** | 72 |
The table above sets out combined unaudited statistics (net after reinsurance) for typical insurers for the first nine months of the year 2005.
Long-term business of primary Insurers in South Africa
| 2002 R’M | 2003 R’M | |
| Primary Insurers | ||
| Primary Insurers Incomes | 174901 | 162807 |
| Net Premiums | 41093 | 43283 |
| Investment Income | 10128 | 519 |
| Total | 226122 | 206609 |
| Expenditure | ||
| Benefits Management | 164839 | 156436 |
| Expense | 10764 | 11379 |
| Commission | 7055 | 7173 |
| Other Expenditure | 27843 | 6820 |
| Total | 210501 | 181808 |
| Assets | 771940 | 813306 |
| Liabilities | 701496 | 733976 |
Long term Business of reinsures in South Africa
Short Term Insurance Industry In South Africa
Here the industry results – Typical insurers (typical insurers, for the purpose of this report, are those insurers who offer types of policies mostly to, the general public).
The table below sets out combined unaudited statistics (net after reinsurance) for typical insurers for the first nine months of 2005.
| 9 Months Ended S Sept.2005 | |
| Net premiums R’M | 20,042 |
| Underwriting profit/(loss) R’M | 1,860 |
| Underwriting and investment income R’m | 3,089 |
| Claims (as % of earned premiums) | 63 |
| As % of net written Premiums: | |
| Management Expenses and Commission | 26 |
| Underwriting profit/(loss) | 9 |
| Underwriting and investment income | 15 |
| Net premium increase (Year to year) | 11 |
| Surplus asset ratio (Median) | 39 |
