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Harare Bureau
LIFE companies should focus on sustainable product innovation and quality rather than price competition to meet the demands of the changing market dynamics, the Insurance and Pensions Commission has said.

This came as the life companies wrote $218 million in net premiums for the nine months to September which is a 17 percent growth from $188 million realised during the same period last year.

In the quarterly report to September 2014, Gross premium written by life companies for the period grew 16 percent from $186 million to $215 million.

Of the $215 million, $198 million was recurring business and the balance of $17 million (8 percent) was new business.

Employee benefits business contributed $150 million compared to $132 million recorded in the previous period while $66 million was for individual life assurance.

Ipec said the slight growth in individual lines business may be due to the industry now focusing on the informal sector via micro insurance in line with prevailing economic realities.

For the period, life companies paid $109 million in net claims which is higher than $93 million recorded in the prior period while total claims grew by 21 percent annually against premium growth of 17 percent.

The quarterly report was based on 10 life companies and two reassurance companies.

For the period under review, the three biggest players controlled $177 million or 84 percent of net premium written (September 2013: $150 million or 81 percent).

The expense and combined ratios remained almost stagnant at levels of 25 percent and 76 percent respectively.

Total assets grew by 12 percent from $1,46 billion last year to $1, 67 billion in the current reporting period.

Ipec said major challenges affecting the industry were minimal compliancy with prescribed assets ratio, capitalisation among others and the Commission will continue to work with the industry in order to ensure compliancy

High operating expenses for the period under review saw profitability for direct insurance companies and reinsurance companies deteriorating owing to increasing operating expenses.

The report noted that total profit after tax for non-life insurers decreased to $8,79 million for the nine months to September 2014 from $10,50 million recorded in the previous comparative period.

Profit after tax for reinsurers decreased 2013 to $1,39 million for the period from $6,50 million during the previous period.

The business ceded to reinsurers decreased by 6, 22 percent to $68,08 from $72,58 for the previous period.

Ipec said generally there were shrinkages in business generated from the majority of business classes.

Positive growth was recorded in some classes, with the fastest growing business being observed in engineering and personal accident with growth rates of 23,32 percent and 20,62 percent. The business generated by insurance companies remained focused towards motor and fire insurance, with the two business classes contributing 63,87 percent of total GPW for the period under review compared to 62,19 percent of the previous comparative period.

Motor insurance business remained the dominant source of business accounting for more than 40 percent.

Non-life insurance companies reported solvency margins which were above the minimum requirement of 25 percent according to IPEC.

The industry average solvency margin for the period was 68,41 percent compared to 65,50 percent of the previous period.

Total assets for direct non-life insurers continued on a downward trend, which trend started on March 31, 2014.

During the period total assets declined by 2,77 percent from $176,24 million as at June 30, 2014 to $171,37 million as at September 30, 2014.

The decrease was mainly attributable to writing off of premium debtors as well as deferred acquisition costs net of unearned commission reserves from $40,19 million and $6,93 million as at June 30, 2014 to $33,60 million and $4,13 million as at September 30, 2014 respectively.

There were no significant changes in the distribution of total assets for non-life insurers during the quarter under review.

Total assets remained skewed towards investments and operating assets and the two asset classes constituted a total of 57,09 percent of total assets.

There was an improvement, though insignificant, in the proportion of total assets attributable to investments from 39,39 percent as at June 30, 2014 to 41,48 percent as at September 30, 2014.

IPEC said the level of investments was considered to be inadequate to support all the liabilities directly coming from non-life insurance sector’s main business which amounted to $73,76 million as at September 30, 2014.

The inadequacy of investments to cover insurance liabilities was aggravated by the quality of the assets where significant proportions of some insurers’ assets are tied up in exposures to related parties mainly in form of loans.