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8 May 2007

The position of the life insurance policy industry looks good because of high markets, but discontinued policies and lower flood to retirement annuities stays a headache.

According to the newest data of last year for the Association of Life Insurers (ALI) the total income was 23% higher on R201.9 milliard. This includes the existing premium income for individual business and group schemes, and mirrors investment income.

The sturdy market on the JSE gave the industry a definite advantage. Without it problems could have arised if you take in account that R80 milliard's worth of individual claims had been paid out, an increase of 10% in comparison with 2005.

Mr.Gerhard Joubert, chief executive officer of the ALI says that pay-outs are growing steadily the last couple of years. "It is expected, given steadier investment income and the new generation risk products that offer higher cover."

Trust by the public in retirement annuity funds (RA- Funds) had not yet recover fully. The output of new repeating premiums was R1.1 milliard in comparison with R1.3 milliard in 2005. The input to RA funds are not back to the levels of 2004 when some decisions by Fund Arbiter shock the industry.

Joubert is full of hope that new inisiatives like the settling of bigger pay-outs of R3 milliard together with the Zimele-inisiative will restore trust in the industry. Zimele, who made life products more accessible to lower income groups, still has a long road ahead because of the industry's apparent non-progress with discontinued policies.

Discontinued policies where premiums are stopped before the original costs are collected, increased with 34% and in 2005 with 22%.

It raises worries, admits Joubert but he trusts that the affordability of low income policies are well met. "Players in the industry have greater incentives because investors get more money because of rising markets. The industry also undertakes to increase the bought of values.

Bought off policies originate when a client stops paying premiums and the full value of the investment product are paid out.

A turn around point is met with new individual life businesses, he says, that increased with 14% to R50.2 milliard. This includes repeating and single premiums.

The ALI did not say what the influence of discontinued or brought off policies were. One of two policies sold in the past was either bought off or discontinued within the first year.