Ipec challenges life assurance sector to diversify sources of revenue

The life assurance sector should drive innovation by developing products that align with market needs and reduce the over-reliance on funeral assurance, the Insurance and Pensions Commission (Ipec) has said.

According to Ipec’s fourth quarter (Q4 2024) Life Assurance report, the sector’s insurance revenue was ZiG3,15 billion, equivalent to US$175 million, reflecting a 9 percent increase from the equivalent of US$161,22 million reported for the same period in 2023.

The report noted that foreign currency business contributed 65 percent of the total insurance revenue, and the primary revenue drivers in the life assurance sector were funeral assurance and group life assurance; they jointly contributed 86,75 percent of the total revenue.

“The proportion of funeral assurance and group life assurance to total revenue has been steadily increasing at the expense of traditional life assurance products. The industry is urged to drive innovation by developing products that align with market needs,” reads part of the report.

Ipec said restoring consumer confidence is a key priority for the life insurance industry to reignite interest and uptake of long-term insurance products.

The report shows that funeral assurance remains the dominant product within the life assurance sector, contributing 70,82 percent of total revenue.

Group life assurance follows, generating 15,93 percent of total revenue, and the remaining 13,26 percent of revenue comes from other life insurance products, including endowment plans, term assurance, and whole life policies.

According to Ipec, the leading five assurance companies primarily concentrate on funeral assurance and group life products.

Nyaradzo Life and Doves Life focus solely on funeral assurance, whereas Old Mutual, Zimnat, and First Mutual specialise in group life assurance.

In terms of market share revenue, Nyaradzo Life and Doves Life dominate the life insurance sector, holding a combined market share of 59,85 percent, while the remaining insurers share the other 40,15 percent of the market.

Ipec said that in order to drive the growth of the industry, industry players should focus on creating products that are tailored to the current market conditions and changing consumer needs.

“Over-dependence on the funeral assurance business may not be a viable long-term strategy,” the industry regulator said.

In terms of market share by asset, Old Mutual and First Mutual Life dominate the life assurance sector, holding a combined 48 percent market share, while the remaining entities share the other 52 percent.

Ipec said life assurance companies should maintain a robust asset base with suitable tenures and liquidity profiles to ensure they can meet their liabilities as they become due.

According to the report, the life assurance sector generated foreign currency revenue totalling US$113,30 million, marking a 119 percent real increase from the US$51,86 million recorded for the same period in 2023.

“The increase in foreign currency business is primarily attributed to policyholders shifting from local currency-denominated policies to foreign currency policies, as a significant portion of the business is recurring.

“During the period under review, foreign currency business accounted for 65 per cent of total revenue, representing a 103 percent increase from the 32 percent recorded during the same period in 2023,” Ipec said.

The Commission highlighted that in accordance with SI 280 of 2020, assurance companies are reminded to invest foreign currency premiums in foreign currency assets and settle claims in foreign currency.

According to the report, life assurance companies primarily invest in quoted equities and investment properties, which collectively account for 44,3 percent of their total assets.

Ipec said these investments are considered more suitable in uncertain conditions due to their favourable risk and return profiles.herald