South Africans’ confidence in life insurance rises 13 points

Feb 06, 2014

An auditing firm, EY, released a survey showing confidence in life insurance has improved in South Africa in the fourth quarter, thanks to a rebound in premium growth.

An auditing firm, EY, released a survey showing confidence in life insurance has improved in South Africa in the fourth quarter, thanks to a rebound in premium growth.

Confidence had fallen in the third quarter on the back of weaker growth in premiums, but their recovery boosted the index, which rose from 67 points in the third quarter to 80 points in the fourth quarter.

EY insurance analyst Malcolm Rapson explained that “whilst insurers also earn a considerable portion of their income from investment returns, premium income is one key indicator of the underlying health of the business.”

As interest rates fall, investment returns decline and insurers have to increase their risk exposure to maintain good earnings growth.

Fortunately, lower interest rates also mean that debtors are left with more disposable income, which they can use to improve their insurance cover.

Although Q3 saw a decline in the profitability of risk based products, this may have been only a short term correction after a year of strong growth.

However, Mr Radson remains prudent, stating: “It is difficult to read from a single quarter whether risk profitability will remain under pressure going into 2014”.ADNFCR-2976-ID-801690631-ADNFCR