‘Roads unsatisfactory’ says KPMG survey - 17 Sep 2009 07:14
According to a study done by KPMG of insurance statistics over 2008, short-term insurers are suffering losses. With market-related profits not remaining parallel to inflation or the gross domestic product. While the global recession is partly to blame, it’s not entirely at fault. Insurers have been paying out more, taking on more insurance risks.
While a large percentage of the claims made against insurance companies are a result of industrial property damage, the poor growth in the sector can be attributed as well to poor risk management and motor claims.
The survey showed that many short-term insurers motor books were running at a loss which are a result of many factors. South African roads are not satisfactory, especially now with the Gauteng Freeway Improvement Project underway to improve the road network ahead of the 2010 World Cup. Insurers claim that the problem is exacerbated by inexperienced drivers and expensive motor parts.
The problem though is not exclusively external, notes the survey findings. Motor risks are not being properly underwritten and insurance companies are taking more risk on themselves.They need to charge appropriate risk rates and supply either exclusions to policies or selection when determining whether or not to insure. Direct insurers and niche insurers are in a particularly favourable position to do this.
A further problem to poor profits is the 20 percent increase in administrative and management expenses rising from R6.4 billion in 2007 to R7.7 billion in 2008. Such costs include increase staff and IT costs while the majority can be attributed to non-recurring items from strategic initiatives.
According to a study done by KPMG of insurance statistics over 2008, short-term insurers are suffering losses. With market-related profits not remaining parallel to inflation or the gross domestic product. While the global recession is partly to blame, it’s not entirely at fault. Insurers have been paying out more, taking on more insurance risks.
While a large percentage of the claims made against insurance companies are a result of industrial property damage, the poor growth in the sector can be attributed as well to poor risk management and motor claims.
The survey showed that many short-term insurers motor books were running at a loss which are a result of many factors. South African roads are not satisfactory, especially now with the Gauteng Freeway Improvement Project underway to improve the road network ahead of the 2010 World Cup. Insurers claim that the problem is exacerbated by inexperienced drivers and expensive motor parts.
The problem though is not exclusively external, notes the survey findings. Motor risks are not being properly underwritten and insurance companies are taking more risk on themselves.They need to charge appropriate risk rates and supply either exclusions to policies or selection when determining whether or not to insure. Direct insurers and niche insurers are in a particularly favourable position to do this.
A further problem to poor profits is the 20 percent increase in administrative and management expenses rising from R6.4 billion in 2007 to R7.7 billion in 2008. Such costs include increase staff and IT costs while the majority can be attributed to non-recurring items from strategic initiatives.