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Appetite dips in traditional life assurance products

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Demand for traditional life assurance products in Zimbabwe plunged by more than 50 percentage points in the last five years,  a new report has shown, as consumers no longer have confidence in the life products, given that investments in such products have been eroded by high inflation.

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The sharp slump is also attributed to unrelenting economic shocks rocking the sub-sector due to recent monetary and fiscal measures enforced by the government, resulting in the players failing to preserve value.

According to the Justice Smith led Commission of Enquiry, policy holders in Zimbabwe lost value amounting to more than US$3bn when the government dollarized the economy in 2009.

Policyholders also lost value when the government re-introduced the Zimbabwe dollar in 2019.

Products such as endowment policies, pure endowment, annuities, term insurance and whole life policies, were contributing more than 60% to the sub-sector’s gross premium written (GPW) in 2015.

But, the contribution to GPW has now hit a five-year low, generating only 5.18% to GPW, reflecting a more than 50 percentage points decline, according to official data obtained from the sector regulator, the Insurance and Pensions Commission (IPEC).

Apparently, the slump has forced life assurers to venture into funeral and other life business.

About 94.80% of the life assurers’ total GPW was generated from funeral business, according to IPEC.

The whole life business contributed about 0.36% to total GPW, pure endowment 0.24%, endowment 0.97%, term insurance 2.82%, and annuities 0.78% in the nine months to September 30, 2020.

“Funeral assurance products continue to dominate life assurance product lines because of their ability to offer tangible benefits that are defined at inception of the policy.

In terms of business composition, 94.82% of the total GPW from traditional life assurance products was generated from funeral assurance business and other group life assurance business.

“Traditional life assurance products, which include term assurance, endowment policies, pure endowment and whole of life, continues to account for a small proportion of business generated during the nine months to September 30,2020, indicating a decreasing appetite for such types of products in the market,” IPEC said.

Analysts said the slump in the appetite for traditional life assurance products may be worse than expected in the next few years due to Zimbabwe’s unending economic crisis.

However, the strong presence of life assurers in the funeral market and are now writing more than 90% of funeral business in the country, have left dedicated funeral insurers in a precarious position and they are struggling to stay afloat.

The life assurance companies’ inflation adjusted growth in GPW was negative 28.18%, an indication that growth in GPW lagged increases in inflation.

The main drivers of nominal growth in GPW for the nine months to 30, September 2020 were funeral assurance business and group life assurance.

The life assurance sector’s GPW for the reviewed period was skewed towards recurring business, which accounted for 79.60% of total business written, while new business accounted for the remaining 20.4%. 

“The low GPW generated from new business is a reflection of the low confidence in the sector, which discourages the uptake of life assurance policies,” IPEC said.

In terms of capitalisation, nine out 12 primary life insurers reported capital positions that were compliant with the minimum capital requirement of ZWL$75m.

The three that did not meet the capital positions were Evolution and Nhaka while Heritage did not supply statutory information.


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