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Johannesburg - Life companies remain well positioned to honour benefit payments due to clients, the Association for Savings and Investment SA (Asisa) said on Thursday.
In a statement it said that South Africans bought life insurance products worth R62bn in new premiums last year, only five percent less than was spent on new recurring and single premiums in 2008 when R65.5bn was received.
Reporting back on the 2009 sales statistics for the SA long-term insurance industry, Peter Dempsey, deputy CEO of Asisa, said the uncertainty caused by the global financial crisis and the resulting economic woes had slowed consumer uptake of life products, particular in the single premium space, in the second half of 2008 and during the first half of 2009.
"However, life insurers experienced a sudden surge of 18 percent in new recurring and single premium business during the second half of last year resulting in the collection of R33.6bn in new premiums for the six month period."
This meant more than half of last year's new life insurance premiums were collected in the latter six months of 2009 as consumer confidence gradually started improving, he added.
Dempsey said that given the economic hardships experienced by the majority of South Africans last year, the initial slowing in single premium business did not come as a surprise.
"We believe that many South Africans probably chose to defer their retirement and therefore did not have lump sum retirement savings to invest in living annuities and compulsory annuities.
"In addition a lower number of consumers would have been inclined to commit spare cash to their retirement annuities and other life linked investments."
Dempsey added, however, that the reluctance to commit single premiums started changing in the second half of last year when demand in new individual single premium business increased by 20%.
He said new recurring premiums also showed an 11% increase in the second half of last year from R6.1bn to R6.7bn, bringing the total half yearly increase for new recurring and single premium business to 18%.
"In addition to purchasing new life and disability insurance and savings policies last year, policyholders also maintained and increased their recurring premiums for existing business."
Total recurring premiums increased by nine percent last year from R61.3bn in 2008 to R66.8bn in 2009.
Dempsey said that while the life insurance industry had assumed the brace position given the economic hardships experienced by South Africa last year, the impact had not been as severe as had initially been expected.
"Total income for the industry from existing individual premiums, group insurance premiums, investment income and fees dropped by only one percent in 2009 compared to 2008, from R251.9bn to R248.8bn."
He added that the industry's total assets increased by four to R1.13 trillion at the end of December last year from R1.08 trillion at the end of December 2008.
This brought the industry close to the pre-crisis asset levels of R1.15 trillion held at the end of 2007.
"Long-term insurance industry assets continue to strongly exceed liabilities by more than three times the legal reserve buffer required.
"This is good news for policyholders as it means that life companies remain well positioned to honour benefit payments due to clients," he said.
- Sapa
