ZIMBABWE'S insurance industry has reported a 14% growth in outstanding claims and a 1% increase in debtors for the year ended December 2013, as the liquidity crunch bites into the sector.
According to the Insurance and Pensions Commission (Ipec)'s 2013 Life Report for Life Assurers, based on 10 direct players and two reassurance companies, total outstanding claims grew by 14% to close the year at US$2,4 million compared to US$2,1 million in 2012.
"The commission requires the industry to expedite payment of all claim obligations as a best practice marketing tool and restoration stakeholder confidence in the industry failure of which it will take punitive measures," the report says.
According to a claims aged analysis chart, there was a 6 286% growth in outstanding claims that are 121 days plus to a value of US$1,2 million compared to a mere US$19 000 at the end of 2012.
First Mutual Life recorded the highest growth in outstanding claims of 804% valued at US$1,3 million. CBZ Life and ZB Life's outstanding claims also grew 327% and 317% to US$205 000 and US$200 000 respectively.
Altfin Insurance Company's outstanding claims fell by 56% to US$179 000 at the end of 2013 while Fidelity Life Assurance's outstanding claims also slid 69% and 47% to US$ 342 000 and US$164 000 respectively.
"For the year under review, life companies paid US$125 million in net claims up from US$88 million. The industry's total claims bill grew by 40% against net premium growth rate 34% which might be an indicator for the industry to proactively deploy prudent underwriting measures," the report says.
The report shows that the life assurance industry reported a debtor's book in the sum of US$7 million, 69% up from US$4 million in 2012. "Given a gross premium figure for the year of US$262 million, the average collection rate was 97% from 98% in December 2012," reads the report. The growth in the debtor's book is a result of tight liquidity that has seen clients failing to honour their obligations.
The report aged debtors chart shows Nyaradzo has most of the outstanding claims valued at US$2,3 million, followed by Fidelity Life and Altfin at US$2,1 and US$1,5 million respectively.
Altfin recorded a 59% growth in outstanding debtors while Heritage recorded a 44% growth.
The industry reported that the total policies that were not taken up amounted to US$1 million compared to US$103 000 prior year while lapse ratios were reportedly in the thresholds of up to 61%.
Fidelity Life Assurance group FD Benard Bare said the company's premiums for the year ended December 2013 were being affected by liquidity challenges. He said the company's gross premiums went up by only 3% to US$14,5 million in the year ended December 2013 due to liquidity challenges that have seen employers failing to pay premiums and individuals cancelling their policies.
"Individual life business reduced by 12% to US$2,8 million as a result," Bare said at the company's annual results briefing, adding group business and funeral assurance income contributed US$9,1 million and US$2,5 million to put total income at US$ 18,9 million, 7% down from US$20,3 million reported last year.
First Mutual Holdings reported a 14% growth in gross premium written to US$101, 1 million for the year ended December 2013 mainly driven by its health division, FML Health Care, which accounted for 40% of the gross premium.
FML said the company could have underwritten more business, but was affected by tight liquidity. To beat the liquidity crisis, insurance players have shifted into direct low cost housing scheme projects development.
the report says the industry wrote US$264 million in net terms, a 34% year-on-year growth with total costs outgrowing premium inflows by 16%, a warning sign for the need for prudent cost management.
The insurance regulator said the life sector, however, realised US$72 million in technical profit in sympathy with a 73% combined ratio compared to 67% in 2012.
For the year ended December 31 2013, life companies wrote US$262 million in gross premiums with 92% or US$250 million made up of recurring business whilst US$22 million or 8% was new business streams buoyed by employee benefits products which contributed 73% of the business portfolio.
IPEC believes players are capable of increasing their new business income streams phenomenally via product innovation biased towards the largely uninsured informal sector. For the year under review, total industry assets grew by 31% to US$1,6 billion at year December 2012: US$1,2 billion.
For the period under review, administration expenditure accounted for 28% or US$53 million of total costs (December 2012:26% or US$33 million), claims-67% or US$125 million (December 2012: 70% or US$89 million) whilst the commission bill was 5% or US$9million (December 2012: 4% or US$5 million).
This culminated in a 72% combined ratio (December 2012: 66%).