Motor insurance dominates sector, as Road Accident Fund threatens closure of 8 insurers.

Motor insurance dominates sector, as Road Accident Fund threatens closure of 8 insurers.

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Motor insurance continued its dominance in Zimbabwe’s non life insurance sector, growing 21.22 % in gross premium written  (GPW) in the industry which saw a 9.25% increase in total GPW in first-half of 2017 (1H17) to $124.90 million from $114.33 million for the half year ended 30 June 2016.

“Motor, fire and miscellaneous accident insurance were the main sources of business for non-life insurance companies accounting for 66.59% of total GPW for the half year ended 30 June 2017,” said the Insurance and Pensions Commission (Ipec).

Motor insurance contributed $56, 6 million up from $46, 7 million which was 45% of the total GWP. Fire and Personal accident insurance with 19,3% and 7, 97% were the second and third largest contributors to the total GWP.

This over dependence by non life insurers on motor insurance premiums is worrying especially after Ipec warned that 8 insurers could close shop if the Road Fund was introduced because they were heavily depended on Third Party Vehicle Insurance for sustainability.

“It is clear that four insurance companies would have to close down immediately. This is because their business is predominantly TPI with gross premium written of about 100 percent. Another four will be in serious financial problems because their TPI business constitutes 60 percent of their gross premium written,” Ipec said.

Ipec and captains of industry have encouraged insurance players in the country to be more innovative and to create micro insurance products that cover the low income earners and the informal sector which dominates 80% of business in Zimbabwe.

To facilitate the penetration of the low income population, Ipec launched a micro insurance framework to guide the micro insurance products and recently hosted a micro insurance workshop to educate insurers on how to develop insurance products that target the poor.

Ipec is also on a media campaign and drive to educate and inform the population about insurance and the importance of insurance.

Meanwhile, the report was silent on the contribution of claims by class, which makes it difficult to assess the viability of the insurance business by class.

Ipec was however concerned with the concentration of asset base for non-life insurers in fixed assets and premium debtors.

The asset base for non-life insurers was considered to be moderately concentrated in fixed assets and premium debtors. These two asset classes accounted for 13.12% and 18.34% respectively for the quarter under review.

“The Commission is concerned with total assets of 31.46% being concentrated on
premium debtors and fixed assets. It is important for insurers to structure their investments in a manner that would respond to their obligations,” Ipec said.

On the other hand Non-life insurer’s profit after tax increased significantly from $6.88 million for the period ended 30 June 2016 to $11.12 million for the half year ended 30 June 2017.

“This was mainly due to an increase in net premium written which was high as compared to management expenses.”

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