Evolving insurance industry in South Africa

KPMG, global audit and advisory services firm, recently revealed the findings of its annual South African insurance industry survey, reporting robust financial results for both life and non-life insurers for 2010.

According to the survey, there are new forms of competition, an uncertain regulatory landscape and concerns over market and economic conditions.




Gerdus Dixon, the insurance industry leader for KPMG SA, explains: “It appears that the conventional thinking that life and non-life brands should be kept separate is no longer true.”


One of the trends emerging from KPMG's 2011 survey is the cross-selling of products. This is especially true among established insurers who are seeking to capitalise on an existing brand by moving the brand into a new market space.


For example, Discovery, which offers health and life insurance, has recently launched a short-term product and Old Mutual is now marketing short-term insurance in the form of iWyze. Conversely, short-term insurance giant Outsurance now has a life offering in its portfolio.


The insurance industry is hampered by the threat of a double-dip recession as well as a volatile investment market due to the debt markets crisis and this does not bode well for the life insurance industry. According to the report, the next six months will be vital.


“The short-term insurance industry is less dependent on the investment market, and more dependent on good claims experience, which has been favourable in 2011 to date, with no large corporate fire claims and a general improvement in the loss ratios for motor insurance. However, the traditional short-term insurers have been struggling to achieve growth in recent times and a strained economy will not make it easier,” Dixon explained.


In addition to the economic challenges, the industry also has to deal with a regulatory environment subject to significant change.


“There is a wave of new regulations that will all come into force at roughly the same time. The Solvency Assessment and Management (SAM) regime will become effective in 2014, as well as the Treating Customers Fairly (TCF) requirements. In addition, micro-insurance legislation and binder regulations are also on the horizon. This coupled with taxation uncertainties on the life insurance side make for a very fast-paced rate of change in the industry,” said Dixon.


For the time being, the impact of the proposed national health insurance (NHI) is still an unknown, with not enough solid information in the form of facts and figures emerging.


“It's definitely influencing the strategic thinking of players in the industry but the uncertainty around it makes it difficult to act,” said Dixon.


KPMG's 2011 insurance industry survey also highlights the expansion of the more established life and non-life insurers into Africa, with offices and offerings in sub-Saharan Africa and further into the continent. Often insurers' African expansion is in the form of joint ventures with local players or technology companies.


This mixed bag of challenges and opportunities will see insurance companies being more cautious in their trading and operational updates for the remainder of 2011, despite a relatively strong start to the year. - I-Net Bridge


Source -http://iol.co.za
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