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Business Reporter
Funeral assurers posted a two percent growth in net written premiums for the half year to June 30 recording $18,7million compared to $18,3 million of the same period last year. According to the first half funeral assurance report released by the Insurance and Pension Commission, top three funeral assurers wrote $16,8 million of net business while the remaining six players shared $1,8 million business.“Given the high retention ratios, the industry is encouraged to consider risk management and in particular reinsurance as a defensive mechanism. The Commission continues to encourage players to compete on service quality as well as promotion of financial inclusion via micro-insurance,” said IPEC.
For the half year under review, the industry wrote $18,7 million in gross premiums resulting in a negligible retention ratio.
Individual life business constituted $8,2 million of the total business underwritten while the balance of $ 10,4 million was corporate business.
“We continue to encourage players to spread risk via reinsurance as this will increase their underwriting capacity both financially and technical. For the current review period, players reported not-taken up policies amounting to $33 000 or less than one percent of the gross premiums written,” said IPEC.
The total outstanding claims for the six month period amounted to $180 000. IPEC highlighted that timeous claims settlement is a prudent marketing tool as well as a way of managing reputational and legal risk.
IPEC said it will continue to investigate players with aged claims both via onsite and offsite inspections.
For the period under review the industry reported total premium debtors amounting to $2,9 million with 41 percent of the this figure aged over 121 days which is indicative of the general liquidity squeeze in the economy.
“Consequently we encourage the industry to introduce more affordable micro-insurance products which suit earning capacity for the majority of policyholders both existing and prospective,” said IPEC
Operational costs for the period amounted to $7,385 million of total costs, claims $5,009 million and total commission was $ 1,616 million.
The industry recorded an average combined ratio of 75 percent compared to 80 percent of the same period last year and an expense ratio of 48 percent compared to 46 percent of last year.
IPEC said cost management continues to be a critical success factor in this challenging operating environment.
As at 30 June 2016, the total asset base for the funeral industry was $56,136 million. Prescribed assets continued to be grossly under-subscribed despite directives to the contrary as well as regulatory minimum of 7,5 percent. IPEC said it will continue to penalise the industry in order to ensure compliance.
During the period under review three entities continued to be under-capitalised well below the minimum required capital levels of $1,5 million.
Corrective efforts are on-going. The industry reported average capital to liability ratio of 134 percent and liquid ratio of 123 percent showing solid capacity to offset claims and other obligations on demand.
The industry continued to show signs that it is a viable albeit some challenges relating to premium debtors, capitalization as well as compliance to prescribed paper. “Various engagements, administrative, and punitive are on course to restore legal and regulatory concerns,” said IPEC.
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