Short Term Insurance Industry Hurt by Economy

September 17 - An insurance study survey showed "worrisome" results pertaining to the short term insurance in South Africa.

KPMG's industry survey showed that poor economic conditions last year affected short term insurance groups in particular. A drop in disposal income meant that consumers were less able to fund their insurance premiums, while unemployment also played in a part in these poorer figures.

Those short term insurance groups who took part in the KPMG survey showed that their gross premiums had increased 9.2% from 2007 - a total of R51 billion.

Gerdus Dixon, speaking for KMPG, said: "When the premium growth is compared with consumer price inflation of 11.5% and GDP of 3.1% in the period, it is clear the short term insurance market shrank in real terms. This is a worrisome statistic."

Other factors were also researched, including underwriting profit and investment losses.

While groups reported investment profit of R87.9 billion? in 2007, that number dropped to a dismal R72.4 billion in losses in 2008.

Underwriting profit was down by over 35% on the R1.7 billion reported in 2007 to R1.1 billion in 2008.

KPMG said that this was the result of motor risk and high industrial property claims, among other factors.

Risk management was not seen as an essential feature in business development in the years 2005 to 2007 and the insurance industry was now paying the price in higher claims several years later.