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Abandoned life policies surges

BY FIDELITY MHLANGA

THE life assurance sector reported a total of 104 678 not-taken-up (NTU) policies with a total gross premium of ZW$90,33 million(US$1,06 million) during the first quarter of 2021, up from 5 826 policies in the comparative period last year.

For the quarter, ended March 31, 2021 premiums lost on NTU policies constituted 2,64% of total Gross Premium Written (GPW) for the quarter,  the Insurance and Pensions Commission (Ipec) report shows.

“The increase in not-taken-up policies is attributed to the negative effects of the Covid-19 induced lockdown and restrictions as some policyholders most likely faced challenges to honour their premium payments,” Ipec said.

The commission noted that the NTU policies may also be attributable to improperly trained sales staff failing to properly market the products.

For the quarter ended March 31, 2021, the life assurance sector had a total of 1,98 million lapsable policies, out of which 177 228 policies lapsed, translating into a lapse ratio of 10,1%.

The lapse ratio of 10,1% compares unfavourably to the lapse ratio of 3,57% recorded for the comparative period ending March 31, 2020.

“The abnormally high lapse ratio of 10,1% may be attributable to a general decline in the disposable incomes because of Covid-19 induced lockdowns and restrictions,” Ipec said.

“The life assurance sector players are encouraged to maintain adequate capital to ensure protection of policyholder funds in times of high claims experience. Adequate capitalisation also helps to cushion the industry against exogenous business shocks, such as an increased claims experience from pandemics such as Covid-19.”

For the quarter ended March 31, 2021, GPW by direct life assurers grew by 492% in nominal terms over the quarter ended March 31, 2020.

“Growth in GPW was mainly attributable to a significant increase in premiums from funeral assurance and group life assurance business. The increase in premiums in these classes may be attributable to premiums tracking inflation and an increase in the uptake of these products on the back of the Covid-19 pandemic,” Ipec said.

The Commission encouraged players to leverage on modern technology to develop both new innovative products that are relevant to their clients’ needs and new distribution channels that enable access by the marginalised sectors of the economy. This is particularly important with the continued uncertainty on the containment of the Covid-19 pandemic.

In terms of the source of business, the life assurance sector’s GPW was skewed towards recurring business, which accounted for 97% of total business written, while new business accounted for the remaining 3% during the quarter ended March 31, 2021.

“The increase in business written by the sector also means that technical liabilities of the sector should accordingly increase in tandem with increased business. The Commission, therefore, encourages players to continuously review their reserving methods, to ensure the adequacy of technical liabilities at all times,” Ipec said.

Players should maintain prudent asset liability matches on their balance sheets.

The commission said funeral assurance products have remained popular over life assurance products in the Zimbabwean insurance markets due to the products’ defined benefit promise given the persistent hyperinflationary environment.

Thus, funeral assurance products continued to dominate life assurance product lines contributing 85,02% of the total GPW for the quarter ended March 31, 2021.

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