Take control of your financial future with our expert personal finance advice. QUICKSHARES ... Long-term insurance lures R50bn. | Life Insurance
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Take control of your financial future with our expert personal finance advice. QUICKSHARES ... Long-term insurance lures R50bn.

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The long-term insurance industry attracted R50.2-billion in new individual life business last year, a 14 percent increase over the R44.2-billion received in 2005.

According to Gerhard Joubert, CEO of the Life Offices' Association (LOA) on Thursday, the increase in new business is heartening given the life industry's efforts to regain consumer confidence.

Joubert said total income for the life industry escalated by 23 percent to R201.9-billion last year compared to the R163.6-billion received in 2005. Total income consists of existing premium income for both individual business and group schemes as well as investment income.

Joubert said that the R50.2-billion new individual business was made up of recurring and single premiums. Individual business consists of life, disability, dread disease and income protection policies, as well as endowments, retirement annuity funds, living annuities and compulsory annuities.

Looking at the five-year picture, life companies recorded a steadily increasing flow of new individual recurring premium business — from R7.3-billion in 2002 to R9.5-billion last year.

In recent years new single premiums had started to lag, but last year the industry saw new inflows of R40.7-billion. This is the highest inflow recorded since 2002 when new single premium business amounted to R36.7-billion.

According to Joubert, the life industry settled individual claims to the value of R80-billion last year. This represents an increase of 10 percent over the R2.7-billion paid in 2005.

Joubert said that there has been a steady growth in benefit payments over the past five years, mainly because of increasing investment returns and new generation risk products typically offering higher cover levels.

He however said the increase of 34 percent in the number of policies lapsed last year was of great concern. In 2005 the number of lapses increased by 22 percent. A lapse occurs when the policyholder stops paying premiums before the fund value exceeds the unrecovered costs meaning that the paid-up (or surrender) value is zero.

He adds, however, that there will always be a strong correlation between growth in new business and growth in lapses. "Since there has been a significant increase in recurring premium inflows from the low-income market, it is not surprising that the lapse rate has also increased."

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admin – Thu, 2007 – 04 – 19 11:00