The South African insurance industry is healthy, robust and innovative while operating in an increasingly challenging financial services environment with intensified competition among institutions for investment funds.

The latest annual reports by the Registrar of long-term and short-term insurance for 2000

show that volatile investment markets and pressure on investment returns required insurers to adopt innovative, but sound investment strategies to achieve reasonable investment returns.

Regarding the long-term industry, the Report says innovation is also evident in the growing number of insurers providing alternative insurance options based on the cell concept and a greater focus on meeting the needs of institutional clients.

The long-term and short-term insurance industry’s contribution to the Gross Domestic Product shows an increasing trend from 2.2% in 1998, 2.4% in 1999 to 2.5% in 2000. However, the number of people employed in the long-term and short-term insurance industries has decreased from 64 373 to 61 780 between December 1999 and December 2000.

Improved consumer confidence has led to an increase of 27.9% (from R115 539m in 1999 to R147 747m in 2000) in premium income for primary insurers. Greater focus by the industry on the reasons for early surrenders of policies led to a stabilisation in the rate at which policies were surrendered. In 1999 the number of surrenders as a percentage of new business was 25.2% while in 2000 it dropped to 16.4%.

Registrar Jeff van Rooyen says although the FSB spends a great deal of time and resources on inspections and investigations, the criminal justice system has historically not been effective in bringing offenders to justice as offences are repeated by the same entitities and / or persons.

“In the light of closer co-operation with the National Director of Public Prosecutors, we expect more effective criminal sanctions in future.”

Van Rooyen added that the number of complaints received from the public had increased significantly during the year under review, largely due to early implementation of the Policyholder Protection Rules by some insurers and an increased awareness of the FSB and its functions.

“We are in the process of strengthening our Market Conduct department to ensure that complaints are dealt with efficiently and timeously. A significant step in this regard was the recent appointment of Gerry Anderson as a new deputy executive officer for Market Conduct.

Regarding the short-term insurance industry, overall it showed some recovery with gross premiums growing by 16% from R21, 250m in 1999 to R24 670m in 2000, and the underwriting deficit decreasing by 61% to R138 m.

Based on the adjusted figures for 1999 and 2000, the short-term insurance industry showed a growth of 8.6% in gross premium income. From 1989 to 1999 the growth rate was 6.5%.

A hardening of the market and the ability of the short-term insurance industry to adapt to an ever-changing and demanding client base and the ability to provide new and innovative products, contributed to the increase.

There is, however, a general perception that the short-term insurance industry is experiencing a decline.

ENDS