South African insurers stage a comeback

South African life insurers could have regained the confidence of
consumers, believes Gerhard Joubert, CEO of industry body the Life
Offices’ Association (LOA). Backing his optimism after several
years of sluggish sales are strong growth numbers for retirement
annuity (RA) sales in the first half of 2007.

According to the LOA, new recurring premium RA funds of ZAR747.1
million ($115 million) were recorded in the first half of 2007, up
36 percent compared with the same period last year. Existing RA
fund members also increased their recurring premiums during the
first six months of this year, lifting them by 12 percent compared
with the same period least year to a total of ZAR5.8 billion. A
similar trend was seen in new single premium RA fund policy sales,
which increased by 21 percent compared with the second half of 2006
to ZAR3.1 billion.

“The fact that we have seen a positive growth pattern for two
consecutive reporting periods is very encouraging,” said Joubert.
Implementation of the industry’s Statement of Intent played a major
role in restoring consumer confidence, he continued.

Among measures implemented were value enhancements to more than
500,000 RA fund and endowment policies during the six months to May
this year. According to the LOA. life insurers set aside a total of
ZAR3 billion to finance the enhancements. In addition, RA fund
policies and endowments that are made paid-up, or where the
premiums or term of the policy are reduced, now receive at least 70
percent of the fund value. RA fund members who retire early now
also receive at least 70 percent of the fund value. Endowments that
are surrendered will receive at least 60 percent of the fund
value.

Joubert noted that not only RAs enjoyed encouraging conditions in
the first half of 2007. The life insurance industry as a whole
recorded total premium and investment income of ZAR106 billion, up
7 percent compared with the same period in 2006. Individual
premiums amounted to ZAR48.3 billion, and group scheme premiums to
ZAR32.7 billion. A net inflow of ZAR7.7 billion was recorded.

Taking some shine off the numbers, Joubert said the lapse rate of
policies in their first year during the first half of 2007 was up
11 percent compared with the first half of 2006. He pointed out
that lapses of credit life policies had a significant
influence.

The credit life sector is currently the subject of an enquiry
launched by the LOA in July to investigate allegations in the media
that certain life and general insurers active in the market had
contravened commission and remuneration regulations.