KPMG Survey: Recession’s impact on insurance industry - 16 Sep 2009 06:47
A recent survey conducted by KPMG found that the 2008 recession had an adverse effect on the financial performance of the insurance industry in South Africa. As a result of declining disposable income and lower employment rates made paying for insurance premiums rather difficult for consumers.
The 2008 KPGM Insurance Industry Survey reported gross written premiums at R51 billion for 2008 which is a 9.2 percent increase from the R46.7 billion reported in 2007. Although an increase, Gerdus Dixon, National Insurance Industry Leader at KPMG, notes that when you compare the premium growth to the 11.5 percent inflation and gross domestic product of 3.1 percent of the same period, there is evidence of the insurance market shrinking.
The reported aggregate underwriting of R1.1 billion for 2008 is down by 35.3 percent from the R1.7 billion of 2007. While the recession and poor investment shares the blame for this statistic, the high number of industrial property claims and pressured motor risk class are also strong influencing factors.
The reason for this, says Dixon, is the poor focus on risk management during the 2005 and 2007 economic growth periods. Neglecting risk management is directly correlated to the 2008 and 2009 losses, which have been the highest in the decade. For insurers this means an increased risk in the area of industrial properties which will most likely be balanced by increasing premiums.
Although increased premiums will do their bit to offset the higher risk and losses experienced over the last two years, they do well to work closely with their clients to mitigate the risks and offset the imbalance.
A recent survey conducted by KPMG found that the 2008 recession had an adverse effect on the financial performance of the insurance industry in South Africa. As a result of declining disposable income and lower employment rates made paying for insurance premiums rather difficult for consumers.
The 2008 KPGM Insurance Industry Survey reported gross written premiums at R51 billion for 2008 which is a 9.2 percent increase from the R46.7 billion reported in 2007. Although an increase, Gerdus Dixon, National Insurance Industry Leader at KPMG, notes that when you compare the premium growth to the 11.5 percent inflation and gross domestic product of 3.1 percent of the same period, there is evidence of the insurance market shrinking.
The reported aggregate underwriting of R1.1 billion for 2008 is down by 35.3 percent from the R1.7 billion of 2007. While the recession and poor investment shares the blame for this statistic, the high number of industrial property claims and pressured motor risk class are also strong influencing factors.
The reason for this, says Dixon, is the poor focus on risk management during the 2005 and 2007 economic growth periods. Neglecting risk management is directly correlated to the 2008 and 2009 losses, which have been the highest in the decade. For insurers this means an increased risk in the area of industrial properties which will most likely be balanced by increasing premiums.
Although increased premiums will do their bit to offset the higher risk and losses experienced over the last two years, they do well to work closely with their clients to mitigate the risks and offset the imbalance.