Funeral Assurance business drives insurance revenue
THE Insurance and Pensions Commissions (IPEC) has said the Funeral Assurance business has become the backbone of the life insurance sector as it generated 73 percent of the insurance revenue in the nine months to September 2023.
IPEC is a statutory body mandated to regulate, supervise, and develop the insurance and pensions industry, for the protection of policyholders and pension scheme members in Zimbabwe.
According to a report, two products namely Funeral Assurance and Group Life Assurance remain the revenue drivers for the life sector.
Direct life assurers reported foreign currency business amounting to US$32,1 million.
“Funeral assurance business was the major contributor with Nyaradzo Life Assurance Company writing 43 percent of the foreign currency business.”
In the period under review, IPEC noted that as at September 30, 2023, the registered Life Assurance companies remained at 12.
However, one life company downgraded its license to a micro-insurer and is in the process of transferring its life portfolio.
Life Assurers had 1 356 agents comprising both corporate and individual life agents, representing an increase from 1 348 reported as at 30 September 2022.
It said the increase in the number of agents was due to new registrations.
In terms of business composition, IPEC said 73 percent of the total Insurance Revenue was generated from the Funeral Assurance business, which has become the backbone of the life insurance sector.
It said traditional life insurance products, which include term assurance, endowment policies, pure endowment and whole life, accounted for only eight percent of business written by Life Assurers, the majority of which are legacy products.
“Life companies are reluctant to issue long-term products on the premise that, pricing of such products in the absence of yield curves and discount rates may not yield positive results.
“On the other hand, policyholders continue to lose interest in long-term products due to uncertainties in the market.
“Long-term savings products remain key in mobilising funds for long-term investments, which is critical for financing national projects, including infrastructure development in the country.”
However, IPEC said it will continue to work with the industry together with the Government to ensure that the operating environment is conducive for the uptake of long-term products.
IPEC said there is a need for the industry to embrace changes in technology, foster innovation, focus more on customer experience and embrace diversity.
“The Commission is ready to support innovation which promotes the uptake of long-term products in the efforts to restore confidence within the sector.”
The report notes that Nyaradzo Life Assurance Company continued to dominate the sector with a market share of 54 percent in terms of insurance revenue.
“The market was dominated by companies whose primary line of business is funeral assurance. Under the funeral business, life companies are mainly providing services though in some cases funeral cash is provided and that is one reason why funeral business remains strong,” said IPEC.
In terms of assets distribution, Old Mutual, Nyaradzo Life and First Mutual Life dominated the sector with their combined share reaching almost three quarters of total sector assets, with Old Mutual having a lead share of 29 percent.
During the period under review, direct Life Assurers reported Insurance Revenue amounting to $281 billion. The two main products driving insurance revenue were the Funeral Assurance and Group Life Assurance business, which constituted 92 percent of the total revenue.
Recurring business constituted 95 percent of the Insurance Revenue for the Life Assurance Sector with only five percent attributable to new business.
The Life Assurance sector received foreign currency revenue amounting to US$32.1 million as at 30 September 2023.
Forex business was mainly driven by the uptake of US$ products under Premium Allocation Approach contracts, which constituted 47 percent of the total revenue.
Meanwhile, during the period under review, IPEC said the economy continued to recover from various macro-economic challenges resulting in improved performance during the third quarter of 2023.
The government implemented bold policy interventions to address transitory price and exchange rate volatility and as a result, the financial sector has begun to experience stability.-chronicle
