In 2007, the South African life and short-term insurance industries saw a number of trends that mirrored those in international markets, and several initiatives that will irrevocably change the insurance landscape.
On the life insurance side, "alternative distribution channels received significant focus from insurers and financial service providers in 2007," says André Dreyer, Business Development Actuary of RGA Reinsurance Company. "South Africa saw a greater focus on direct life insurance, as well as continued growth within the bancassurance sector."
"Advances in automated underwriting also had an impact on the life insurance industry in 2007, as a smarter and quicker way to issue policies has ensured lowered administration costs and more efficient underwriting processes. This has lead to improved profitability for insurers and an easier, more effective way for policyholders to be underwritten."On the short-term side, motor insurance as a general business class has increasingly been experiencing difficulties in 2007, says Viviene Pearson, SAIA Stakeholder Relationship Manager. "An increase in crime, and specifically hijackings, continued high accident rates, and increasing average motor repair costs have been putting pressure on this business class."
The reinsurance market remained stable throughout the year, following a great deal of consolidation in business through client mergers and takeovers during 2005 and 2006, says Dreyer. "The industry sought to find new avenues to grow life insurance business, with specific focus on reaching the emerging market."
Legislation and regulation
Dreyer notes that regulatory factors have also shaped the life insurance landscape in 2007. "In March, the LOA recommended that the AIDS exclusion clause be dropped on all existing life and disability policies, and this was adopted by all the major life insurers in the country.
"The credit life market can expect some repercussions following the Consumer Credit Enquiry and Life Offices' Association's (LOA) fining of member offices for non-compliance with regard to paying maximum commissions. This segment of the market will experience strict scrutiny as the LOA and Financial Services Board (FSB) investigate for other irregularities."
Pearson says that the industry still does not have clarity on the issue of health insurance. In addition, the concerns raised with regards to undesirable practices within the consumer credit insurance arena in the latter part of 2007, ultimately ended in Consumer Credit Insurance Commission hearings.
In July the LOA appointed a panel of long- and short-term insurance experts to delve into problem areas in the consumer credit insurance market. The panel will prepare a report on its findings and develop proposals on how best to address current shortcomings.
Transformation
The difficult and lengthy progress towards the gazetting of the Financial Sector Charter continued in 2007. "However," says Pearson, "when the Charter is gazetted, implementation would be able to go ahead swiftly. The SAIA Financial Sector Charter Consumer Education Initiative has successfully been implemented for the third year running in 2007."
Zimele, the brand aimed at helping South Africa's low income earners to easily identify life insurance products that meet the Financial Sector Charter (FSC) requirements, was launched by the LOA, in addition to a new web based jargon busting tool.
Other highlights
The Statement of Intent was implemented and the values of more than half a million RA fund and endowment policies were enhanced during the first half of this year. The life industry also announced that projected maturity values would be removed from quotations and policy documents next year in a significant move towards better managing customer expectations.
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