Jan
27
Two new research documents released this week by Fitch Ratings analyzed the state of the South African insurance market in 2011 and what challenges and opportunity lie ahead. Overall the global credit ratings agency found that while the business environment in South Africa remains quite challenging at present, both the life and non-life insurance industries have proved to be widely resilient so far and will continue to develop going forward.
While South Africa has certainly been less affected by the 2008 global financial crisis than many other developed countries, the persistent financial market volatility and tough economic conditions that followed have of course had an adverse impact on the domestic insurance industry’s performance, driving down profitability and sales growth across most lines. Despite the South African market showing signs of recovery in 2010 and 2011, with improved local equity markets and consistent economic growth, it remains challenging for insurers to turn a profit. Overall, Fitch expects earnings for insurers to remain under pressure in the near term in view of the difficult and volatile South African and global investment market conditions and continued pressure on disposable income in South Africa. “Although the local economy showed a gradual recovery, the investment markets were volatile and consumers’ disposable incomes remained under pressure,” Fitch noted.
In “South African Life Insurance: Good Performance in Difficult Environment,” Fitch wrote that they had now affirmed the rating outlooks for all life insurers in South Africa as stable after witnessing a number of positive factors in 2011, including market-wide improvements in operating performances, more robust capital levels, higher policyholder resiliency, as well as maintenance of market share. “The local insurance industry performed well in H111, despite tough economic conditions,” Fitch said in their report. “Profitability improved (although it remains under pressure), with major insurance companies reporting higher net profit compared with H110.”
According to Fitch, South Africa’s life insurance industry remains well regulated, highly competitive and moderately saturated. Following the merger of two large domestic insurers, Momentum and Metropolitan in 2010 to form MMI, the South African life market is now dominated by four major insurance companies – OMSA, Sanlam, Liberty and MMI. Together, these groups reported a 14 percent growth in net income for the first half of 2011, taking in ZAR7.1 billion (US$910 million) versus ZAR6.2 billion (US$790 million) in 2010. Fitch added that South Africa’s life insurers have been able to maintain adequate capital reserves during this period as well. Although the minimum regulatory capital adequacy requirement in South Africa is currently only equal to 1 times business outlay , the majority of the country’s life insurers are well capitalized with cover ratios of between 2 and 4, according to Fitch.
The Fitch report also discusses what upcoming regulatory changes could affect the South African life insurance sector going forward, including proposals for a compulsory retirement savings initiative, a National Health Insurance (NHI) system and the Solvency Assessment and Management project. The South African government is taking more proactive steps to combat both the country’s poor savings rate and crumbling public health infrastructure through compulsory pension and health insurance funds. While Fitch believes these moves could all significantly affect how life insurers operate, much about these schemes remains uncertain and the ratings agency expects major insurers will ultimately be able to adapt successfully to the proposed reforms.
In a separate report, “South African Non-Life Insurance: Strong Operating Fundamentals in Tough Environment,” Fitch found that South Africa’s general insurers were facing similar issues to their life market counterparts, and received an identical stable credit outlook in tow. “Despite the ongoing challenging operating environment, all non-life insurers rating outlooks remained stable in 2011. This was attributable to resilient and improved underwriting performances, strong solvency positions and the maintenance of market share,” Fitch wrote.
South Africa’s general insurance market is also well regulated and very competitive. While the market is also currently dominated by four major non-life insurers, these players are not nearly as dominant as the top four in the life market, and only control around a 50 percent market share between them. Like the life market as well, general insurers in South Africa are continuing to face a tough operating environment, where flagging consumer spending power, competition, and low interest rates, limit the ability of insurance companies to set appropriate premium rates for the risks underwritten, which in turn has put downward pressure on company profit margins. Furthermore, Fitch noted that the larger non-life companies are now facing significant competition from non-traditional insurance providers, such as direct writers, banks and retailers.
Despite persistent financial market volatility and a soft pricing market, the South African non-life industry was able to grow last year with the major general insurance companies all reporting higher net profits when compared with the previous year. According to Fitch, these insurers reported a 37 percent growth in annual net income, from ZAR818 million (US$104 million) in 2010 to ZAR1.12 billion (US$140 million) in 2011. This success was reflective of the gradual recovery in the local economy post 2008, improved underwriting performances, strong solvency positions and improved sales. Going forward, the ratings agency has applied a cautious outlook for the South African insurance industry. Fitch expects the margins of both life and non-life insurers to remain under some pressure going into 2012, owing to market competitiveness, downward pricing trends, and relatively stagnant consumer confidence in South Africa.
Companies Mentioned
Fitch Ratings
Fitch Ratings is a global rating agency and provides ratings and analytical services for thousands of banks, financial institutions, insurance companies, corporations, and national governments. Fitch was founded in 1913 and now features dual headquarters in New York and London with over 50 offices worldwide.
Sep
12
South Africa’s ABSA Insurance Company (AIC) has acquired Takafol SA, the first and only Islamic insurance provider operating throughout Africa’s largest economy. The transaction was announced last week for an undisclosed amount and is subject to regulatory approval.
Islamic insurance products, otherwise known as takaful, are mutually beneficial coverage policies that cater specifically to Muslim communities looking for Shariah-compliant savings and investment solutions. Currently the takaful industry comprises only around one percent of the cumulative global insurance market but that will soon improve as highly populated Muslim markets such as Indonesia, Saudi Arabia and Malaysia begin to spend more on protection policies. In April, Ernst & Young’s World Takaful Report forecast the takaful market would likely be worth US$12 billion in 2011, growing 31 percent from US$9.15 billion in 2010. Key takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth. Major foreign insurers have duly taken note of the huge growth potential from this brand of products. For example, Standard Chartered and Allianz Takaful in Qatar entered into a 5 year agreement to distribute Alliaz Takaful’s insurance services through Standard Chartered Bank in 2010. The two insurers then quickly partnered again to allow Standard Chartered SME insurance products to be sold through Allianz Takaful in Bahrain.
Takafol SA was established in 2003 to tap into South Africa’s emerging Islamic insurance market, which now brings in an estimated ZAR 3 billion (US$419 million) in annual premiums. The company found success in being South Africa’s sole firm providing short-term takaful insurance for business, vehicle, personal and household cover. In 2008, Takafol made AIC their underwriting partner and this relationship contributed to Takafol SA’s further development, with personal lines and commercial business growing by more than 66 percent over the next two years.
Due to their successful partnership, Absa Group, parent company of AIC, decided to acquire Takafol SA and merge their operations into Absa’s own developing Islamic financial services sector. After the transaction in completed, Takafol SA will become part of Absa Islamic Banking and operate as the new brand Absa Takafol. The integration of Takafol SA’s Islamic product portfolio into AIC will enable greater control over the company’s underwriting, pricing and administrative efforts. Through AIC meanwhile, the newly-rebranded Absa Takaful will enjoy a greater capitol position and be better able to respond to customer needs in a dynamic international environment. The group will also maintain that Absa’s new range of takaful insurance products will continue to meet global standards of Shari’ah governance.
Speaking on the transaction, Edwyn O’Neill, AIC Managing Director, told reporters that the acquisition of Takafol SA would make Asba the leading provider of Islamic financial solutions in South Africa, with a look towards developing the takaful market on the rest of the continent. “This deal demonstrates Absa’s commitment to provide the Islamic community with a holistic financial services offering that is Shari’ah compliant. Today, we cement our relationship with the Islamic community and recognize that there is a need for similar products in the rest of Africa.”
Uwaiz Jassat, Takafol SA’s CEO who will head the new unit, confirmed that incorporation into Absa would enable their company to further develop their specialized Islamic portfolio for clients and provide the necessary means to expand their presence further in Africa. “The global Takaful and Re-Takaful industry is experiencing significant growth. The principles of mutual or joint guarantee are the foundations of Takaful and play a significant role in the economic and social development of societies. By integrating into the Absa Group, Takafol South Africa will be well positioned to expand Absa’s Takafol offering into the African continent,” Mr. Jassat told reporters.
Absa, majority owned by Britain’s Barclays, has embarked on an ambitious expansion strategy, titled ‘One Absa’, which plans to increase insurance awareness and business opportunity through organic and acquisitive growth in South Africa and throughout the rest of the continent. Growing earnings on the African continent has become a key priority for the banking group. The purchase of Takafol SA has followed the acquisition of a life insurer in Mozambique earlier this month, and the establishment Absa Life Botswana in February. The Islamic insurance market in particular has been an important target for the group and remains one of the best mechanisms to gain a foothold on the African continent. It is estimated that over 40 percent of Africa’s population is Muslim. East Africa in particular has a large Muslim base and approximately half of Nigeria’s 150 million population, long recognized as an African country with significant insurance business potential, practices Islam. Formulating products to cater to these new emerging market clients will be a challenge but necessary to sustaining long term premium growth in Africa.
Other South African insurers are casting their net further a field. This week it emerged that Sanlam Ltd, South Africa’s largest insurance company, plan to spend ZAR 1.9 billion (US$266 million) to purchase 26 percent of India’s Shriram Capital, as they expand operations outside their home market. Sanlam has been looking to spend ZAR 3.2 billion worth of excess capital on purchases in emerging markets in Africa and India. Funds not spent on expansion will be returned to investors, the company said. Sanlam’s Indian investment will help the company expand its presence in the world’s largest democracy, where incomes are rising but insurance penetration remains low. The ability of South African-based insurers to now compete on an international level reflects the maturity of their own market but also the necessity to expand abroad to maintain profitability in a dynamic marketplace.
Insurance Companies Mentioned
ABSA
The Absa Group Limited (Absa) is one of South Africa’s largest financial services conglomerates, providing a comprehensive range of banking, insurance and wealth management products and services. Absa is a subsidiary of Barclays Bank PLC (who hold a majority 55.5%) and serve 11.8 million customers, with 36,000 permanent employees throughout Africa.
Takafol South Africa
Takafol South Africa (Pty) Ltd. provide Shariah compliant insurance products and services both in South Africa and globally.
Apr
15
Worldwide Takaful Insurance Market Predicted to Grow by 31 Percent in 2011
Filed Under Africa, International Healthcare, Life Insurance, Medical Insurance, Middle East, UAE Insurance | 8 Comments
Last Saturday at the sixth Annual World Takaful Conference in Dubai, Ernst and Young predicted that the worldwide Takaful insurance market would reach a value of $12 billion USD in 2011; the prediction was announced in the Ernst and Young World Takaful Report 2011: Transforming Operating Performance, and represents an increase of 31 percent from $9.15 billion in 2010. Takaful, an Islamic-compliant insurance concept, is a rapidly growing industry concentrated mainly in Saudi Arabia (making up $3.86 billion USD of the industry in 2009), Malaysia ($1.15 billion USD), UAE ($640 million USD), South East Asia, and North Africa.
In the past year, most GCC Takaful markets have slowed down. “The Takaful industry and its core markets have experienced another challenging year, where positive signs of economic recovery and improved business sentiment were shaken by the socio-political uncertainty witnessed across the Middle East and North Africa (Mena) region in the first quarter of 2011,” said Ashar Nazim, an executive director and Islamic financial services leader at Ernst and Young.
Despite the slowdown in the sector, global growth estimates are predicted to remain on track to reach $12 billion in 2011. “The industry’s not without risk, but its potential remains an important feature of Muslim emerging markets for many indigenous and global insurance players,” said Nazim. He goes on to add, “the (Gulf Arab region) is a competitive market with a large number of players and will drive growth for the industry… Key Takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth.”
Other key challenges for the growth of Takaful insurance products include a lack of expertise and the ongoing socio-political instability across much of North Africa and the Middle East. Ernst and Young also said that changing regulations and misaligned cost base also hinder the growth of the market.
The Saudi Takaful market, however, proves to be an exception to the global slowdown in the Islamic insurance market. RNCOS, a research and analytical consultancy, recently released its industry report, which said that, “We have found that Saudi Arabia has emerged as the largest market for Takaful insurance, followed by Malaysia. Takaful insurance is growing at an annual growth rate of 15-20 percent globally, but it will grow at faster rate in Saudi Arabia because premium paid by the insured people is considered as donation and not premium.” In addition, with the recent mandate of compulsory health insurance for private employees, the health insurance market is expected to grow at an even faster pace.
The report forecasts that the general insurance category of Takaful products will grow at a compound annual growth rate (CAGR) of more than 24 percent from 2010 to 2012, due to increasing demand for motor and energy insurance. Property and aviation insurance policies are also expected to emerge as fast growing segments of the general insurance sector.
Similar to Saudi Arabia, other Gulf States’ insurance industries have also experienced a boost, in part due to compulsory health insurance for foreign employees, and a push towards private health insurance. The Kuwait National Healthcare system is currently pushing for a new private health insurance scheme in order to meet overcrowding, long waiting times, and a general growing dissatisfaction with the public health sector.
Bahrain National Holding (BNH) is also growing despite the political turmoil occurring in the country. In its annual shareholder meeting on March 29th, 2011, BNH announced that it remains adamant about continuing with plans on expanding its services throughout the Gulf region.
Sudan, which contributes $340 million USD to the Takaful insurance industry, is currently the largest market outside the Gulf region. However, Egypt, Bangladesh, and Pakistan’s Takaful industries are all growing quite rapidly.
In fact, Egypt could even stand to benefit from the ongoing regional instability. The UAE-based Salama Islamic Arab Insurance’s chief executive stated that turmoil in the Egyptian market has not only resulted in more claims, but has also generated more interest and awareness of Takaful insurance, which creates more demand and unprecedented opportunities for the market.
Regionally, the Indian subcontinent’s Takaful contributions have increased by 85 percent, making it the fastest growing Takaful market in the world. The next fastest growing market is the Middle East, which has grown by 40 percent, followed by the GCC (31 percent), South East Asia (29 percent), and Africa (26 percent).
In terms of individual countries, Indonesia had the largest Takaful market growth rate with 67 percent. It is followed by Bangladesh with 58 percent and Saudi Arabia with 34 percent.
The overall Malaysian insurance industry is also growing at a rapid pace with 12 percent projected growth in 2011. The Malaysian Takaful Association attributes this predicted growth to the expansion of the Takaful industry into rural areas of the country. There is a large interest in Takaful products. With only a 10 percent market penetration, there is much room for improvement and growth.
Generally, the Takaful industry receives a lower return on equity (RoE) because of the intense competition that small local insurers encounter from more established firms who have had experience in the conventional insurance market.
For the GCC, conventional insurers received an average RoE of 11 percent, while the Takaful insurers announced an average of 10 percent in 2010.
In Malaysia, the disparity is even greater with an average RoE of 16 percent for conventional insurers and 6 percent for Takaful companies. This difference, however, may arise from a significantly lower claim ratio than the GCC, mostly because of differences in business lines.
Also, in the GCC, the Takaful market is dominated by general insurance, while in Malaysia it is dominated by family Takaful. In the Mena region, the family Takaful market is still underpenetrated, contributing to only 5 percent of gross global annuals premiums, while conventional life insurance contributed to 58 percent. In comparison, in Malaysia, the family Takaful industry contributed to 77 percent of gross annual premiums in 2010.
Insurance Companies Mentioned
Bahrain National Holding
BNH, established in 1998, is based in Manama, Bahrain. Together with its many subsidiaries, BNH provides insurance and risk management solutions for many industries and individuals in the Gulf region.
Apr
14
North Africa Insurance Market Presents International Opportunities
Filed Under Africa, Middle East | 2 Comments
The insurance industry in North Africa is in its infancy, and while that is unlikely to change due to political unrest in the short term, analysts project that with many of the appropriate foundations already established within the past decade, the North African insurance sector could be set for pronounced long term growth and development opportunities in the region.
A new research document from Standard & Poor’s, the foremost worldwide insurance rating and information agency, details how the insurance business in the Algerian, Moroccan and Tunisian markets could outpace their countries’ cumulative annual economic growth in the long term. Market penetration for insurance products in the region is low and many standard coverage services remain untapped on the market, including life, property and savings-related insurance options. The insurance premiums collected in North Africa are roughly half a percent of total world premiums, and the contribution of the insurance sector towards the GDP of the region remains small by international standards. This demonstrates that insurance is not yet being used as a vehicle for savings and financing investments in these countries.
As the North African economies grow, urbanize, develop their infrastructure, and further liberalize their markets, demand for life and health insurance services is set to increase. Many countries have been updating their laws and regulation towards the insurance industry: increasing minimum capital requirements, professionalizing risk management systems, and opening up the field to foreign competition. Consolidation among insurers regionally is anticipated to begin over the next few years. This will form entities with the sufficient financial and technical capabilities to benefit from economies of scale. The increase in minimum capital requirements has been seen as a prod in that direction. Insurers who can successfully access this emerging market of potential customers could see “possible volume jumps in insurance businesses in the Maghreb,” the S&P report held.
In an interview, Lotfi Elbarhdadi, Director at Standard & Poor’s, agreed the area was promising: “There is potential for growth,” he added, “Penetration rates are really low, but markets are growing and there are many lines of business that are untapped.”
The unique demographics of the region could represent a further source for prosperity. Around five percent of the North African population is over 65, and 30 percent are under the age of 14. These indicators demonstrate the substantial human capital that the region possesses, and the potential for high economic growth rates if the right policy mix is further utilized in the previously highlighted countries. This could be an opportunity in particular for the life insurance business as Sharia-compliant Takaful grows in the region while the populations in Western industrialized countries are set to decline.
The volatility of the region remains one of the main deterrents against continued industry growth. Much of the prosperity in the region is dependent on high oil prices. This factor coupled with high youth unemployment, and pronounced transparency and corruption issues in governance, could drive away foreign investors and lower the investment rates by the local populace.
Fareed Lutfi, secretary general for the Coordination Commission for Gulf Insurance and Reinsurance Cos., a UAE based regulatory authority for regional insurers, affirmed that current political affairs on the continent were disruptive: “Political unrest will present a challenge for insurers in the medium term and North Africa has traditionally been a closed market,” However the market, he believed, “will present opportunities in the long run as governments become more stable and people begin to seek more medical and life insurance, looking for stability.”
Tunisia has been in a state of political flux since the ousting of longtime president Ben Ali in January 2011. The protracted transition period has had a pronounced effect on the local economy and could further hamper the growth prospects of the domestic insurance industry. The S&P report noted that once the new government is established it is uncertain whether they will institute any new policies that would alter insurance pricing and coverage. Mr. Elbarhdadi explains, “In Tunisia particularly, economic activity has already been impacted by the unrest, so insurers there will have less leeway to do business in 2011,” adding, “The unrest will put brakes on growth for the coming year, but we don’t question long-term growth for the region.”
The Tunisian insurance market had been reporting continued growth over the past three years, with the volume of premiums rising well over 6 percent a year. According to the latest figures from S&P, total premium income in Tunisia exceeded TND1 billion (US $730 million) for 2009. The insurance penetration rate and standard rate for premiums per capita remained low at 1.9 percent and US$70 a head, in 2009.
Analysts also believe that Egypt could present substantial long-term growth potential in the insurance market, despite dealing with its own prolonged political crisis. Managing Director of Kuwait-based Safenet Consultants International, Tony Awad, remarked that in times of pronounced instability, people’s priorities can often shift toward personal planning for the future, especially retirement savings. This presents an opportunity for insurance companies to offer more stable solutions to address Egyptian citizen’s increasing feelings of insecurity. Mr. Awad further commented that these potential insurance customers would take time to develop understanding and utilization of the products, adding, “The effect on insurance will be felt later on; now people will become more critical about the existence of a sufficient social security system and health care system.”
Morocco has been one of the few successes regarding insurance sector development in the region thus far. The country features the second largest insurance market in Africa, and one of the largest among the Arab nations. Mr. Lufti confirmed that “Morocco has one of the most well-developed insurance markets in North Africa, especially when it comes to life and bank insurance. The rest of the region now has a chance to catch up.” Although this feat is commendable in context, the percentage of people covered by insurance policies in Morocco remains just 3 percent, with premiums per capita of US $84 for 2009. These statistics are favorable in comparison to Algeria, where S&P reported that only 0.7 percent of the populace has any sort of coverage and where premiums totaled US$33.8 per capita in 2009.
As the global insurance markets have opened up, multinational insurers are shifting their focal point to up-and-coming insurance industries in emerging markets throughout the world. These emerging economies are projected to offer better opportunities for growth in premium returns to offset the more static performance of the established European and North American markets. While much of the international focus has thus far been on the Asian and Middle Eastern regions, North Africa should present a reasonably attractive business opportunity for multinational insurers over the next few years. Foreign insurers have not yet entered the North African markets en masse, typically focusing on narrow lines of business within countries when permitted. This should all soon change as the governments and regulators of these North African countries will be soon committed to the reform and deregulation of their insurance industries.
On May 23-24 2011 The MENA Insurance Summit is being held in Dubai. The conference will attract many regional and international insurance authorities and will discuss the further development of the insurance market in North Africa and the Middle East. .
Companies Mentioned
Standard & Poor’s
Standard & Poor’s (commonly referred to as S&P) is a business branch of publishing house McGraw-Hill. Operating out of 20 countries, S&P provides the investment community with independent credit ratings on important financial vehicles such as stocks, municipal bonds,corporate bonds and mutual funds. In addition to its risk management, investment research and credit rating services, Standard & Poor’s is known for its indexes, in particular the S&P 500 index.
Feb
23
Discovery Holdings Reports Jump in 2010 Profits.
Filed Under Africa, Health Insurance, Insurance Company, Medical Insurance, USA Health Insurance | 3 Comments
South Africa’s Discovery Holdings has reported a jump in net earnings for the six month period ending on 31st December 2010 to total ZAR 941 million (US$132 million), representing a 25 percent increase on the previous six monthly period.
Normalized operating earnings in the period increased by 28 percent to ZAR 1.33 billion (US$ 186 million), excluding the one-off cost of the take-over of UK’s Standard Life Healthcare which amounted to ZAR 6 billion rand (US$223.4 million).
There was a 15 percent growth in new business to reach ZAR 3.7 billion (US$ 519 million) with embedded value up by 15 percent to total ZAR 24 billion (US$ 3.3 billion).
Speaking on the insurer’s 6 months earnings, Adrian Gore, Discovery’s Chief Executive Officer, said: “While the period under review has been complex, impacted by both the lingering effects of the financial crisis and the considerable policy debates that affect the markets in which Discovery operates, we are satisfied with the overall performance and continue to focus on providing our customers with high quality, innovative and relevant products.”
Discovery performed well in its domestic market, South Africa, with new business growing by 10 percent helping operating profits to increase from ZAR 555 million (US$ 77 million) to ZAR 619 million (US$ 86 million), reflecting a 12 percent increase over the 6 month period.
The Discovery Health Insurance business in South Africa now has 2.5 million members enrolled in private medical schemes managed by the insurer, following a 12 percent increase in numbers between June and December 2010.
Membership of the largest scheme in South African medical insurance – the Discovery Healthy Medical Scheme – grew by 10 percent, with client renewals of health policies amounting to almost 98 percent.
The Discovery Health business is working on improving access to private healthcare in South Africa for low-income sectors of the population in a bid to increase overall membership in the country.
Also, within Discovery’s domestic market, the health insurer said it remains committed to working in unison with the National Health Insurance system in South Africa which is currently in a transition period with reform implementation expected next year. The South Africa planned National Health Insurance system is being set-up in order for the country to provide universal healthcare coverage for the core population.
The Johannesburg-based insurer’s life insurance business – Discovery Life – performed well, with an increase of 14 percent over the 6 month period to generate operating profits of ZAR 768 million (US$ 107 million) up from ZAR 675 million (US$ 94 million); the growth being due to improvements in mortality and morbidity policy rates.
Discovery’s joint venture in the UK with PruHealth was boosted in 2010 with the acquisition of Standard Life Healthcare, which helped leverage its position in the UK private health insurance market. The Discovery and PruHealth insurance business covers over 674,000 lives within the UK, and is one of the major players in the private medical insurance (PMI) market in Britain; the United Kingdom operating profit for Discovery was ZAR 35 million (US$ 4.9 million) during the last six month trading period.
“The quality of the Standard Life Healthcare business surpassed our expectations, with the loss ratio, levels of lapses and profitability levels exceeding our expectation. The combination of the management action undertaken within PruHealth, and the acquisition of Standard Life Healthcare, has created a business with strong fundamental drivers of value and one that represents significant prospects for Discovery.” Mr.Gore said on the PruHealth venture.
In China’s thriving insurance sector, Discovery’s Ping An Health business received local regulatory approval from the Chinese Insurance Regulatory Commission (CIRC) to commence operating in a market which has becoming increasingly important for global health insurers. The Ping An Health venture was initiated in 2009, with the South African based insurer buying a 20 percent stake in the Chinese business.
Speaking on the Chinese health business Mr.Gore said: “From a product perspective, significant work has taken place to tailor Discovery’s capabilities to the Chinese market. We remain excited by the potential of the Chinese private health insurance market in the long-term.”
Discovery will be seeking other opportunities to enhance its global operations in the future in order to continue its planned growth and, following the announcement of Discovery’s last 6 month results, the insurer has reported that it has entered into an agreement with American insurer Humana to offer wellness and loyalty scheme programmes to 10 million of the US insurers customers. Discovery’s link will give Humama’s members the opportunity to purchase discounted gym memberships and other health incentive benefits.
Humana is the fourth largest health insurer in the USA and has agreed to invest ZAR 107 million (US$15 million) in Discovery’s Vitality Group subsidiary – a wellness programme provider. The deal means the South African group increases its exposure in the US health insurance sector, as the US health insurer seeks new opportunities for developing client incentives and the promotion of healthier living.
The Discovery and Humana partnership will see the South African insurer offering incentives for Humana’s 10 million clients to live healthier lifestyles, and comes at a time when concerns are growing about rising medical costs and the increase of chronic diseases among Americans; these factors having caused a hike in healthcare premiums within the USA health insurance market. The South African and US venture is designed to offer US clients incentives to take-up healthy activities such as regular gym work-outs to improve their long term health.
Discovery’s core health business in South Africa has been growing in recent years, mainly due to the buoyant economy driven by the burgeoning mining and agricultural sectors. With a significant proportion of the South African population enjoying middle to upper middle class status, private health insurance has expanded rapidly. Discovery offers a series of health plans under the branding of executive, comprehensive, priority, saver, core and keycare, which have helped the Johannesburg based insurer become the leading healthcare insurer in South Africa.
Insurance Companies Mentioned:
Discovery Holdings
Discovery is a financial services provider based in Johannesburg, South Africa, and was founded in 1992. Discovery offers health and life insurance in different markets as well as investment services and credit cards. They also have a joint venture life and health insurance companies with Prudential called PruHealth and PruProtect, which are structured under the PruProtection banner.
PruHealth
PruHealth is part of a joint venture named Prudential Health Holdings Limited, between Prudential Assurance Company of the UK and Discovery Holdings. The joint venture was started in 2004 and offers private medical insurance in the United Kingdom. Currently Discovery Holdings owns a 75 percent stake in the joint venture while Prudential Assurance holds the remaining 25 percent.
Humana
Humana is based in Louisville and is one the leading US health insurers, with approximately 10.2 million medical members. Humana is a full-service benefits and well-being solutions company, offering a wide array of health, pharmacy and supplemental benefit plans for employer groups, government programs and individuals, as well as primary and workplace care through its medical centers and worksite medical facilities.
Dec
17
Potential in the Microinsurance Market
Filed Under Africa, China, Income Protection, Life Insurance | 5 Comments
The global microinsurance market is estimated to be worth US$40 billion to the insurance industry according to a report by Zurich based Swiss Reinsurance.
Swiss Re has highlighted the huge potential in supplying the massive populations in countries in the emerging markets of Asia, Latin America and Africa, with low cost insurance products. The report identifies the scope to expand the range of products, which could be made available to low-income groups in these continents.
The historic reason for the under-development of insurance products to low income segments in emerging market economies has been the inability to find commercial solutions to the supply of products for this market. However, the Swiss Re report estimates that there are approximately 2.6 billion people worldwide – living on US$1.25 to US$4 a day – requiring low cost insurance protection, which could be made available on a commercial basis; the potential earnings from this market is estimated to be US$33 billion.
Additionally, it is estimated that a market – totalling 1.4 billion people and US$7 billion in premium value – exists to supply insurance to individuals living on less than US$1.25 per day, with help from government support / international aid.
The author of the new sigma study, Amit Kalra, said: “For insurers, microinsurance creates an opportunity to tap into new markets and build a strong brand value that can be used for selling conventional insurance products in the future.”
The largely untapped microinsuance market provides global insurers with new opportunities to grow, and create a new source of premium income driven by the volume of sales involved. With the global economic conditions remaining challenging for multinational insurers – partly stemming from the demands in the mature insurance markets in Europe and Northern America being static – insurers recognize the opportunities presented with access to under-developed insurance markets.
The economies in Asian countries such as China, India and Indonesia have been able to buck the global trend of low growth by strengthening economic activity, and represent the optimum potential for microinsurance; the populations in China and India top 2.6 billion people.
In addition to the immediate commercial benefits mircoinsurance provides for insurers, there would potentially be longer term scope for business growth as new customers become accustomed to the benefits of insurance protection and saving schemes and expand the purchase of new products.
Amit Kalra said: ”The Asia-Pacific region is the fastest growing and the largest microinsurance market. Microinsurance has also grown considerably in African and Latin American countries despite these being relatively smaller microinsurance markets at present.”
The largest selling segment in the micronisurance market currently is credit life – a mortality cover coupled with a mircrocredit element. However, the need for better quality and a broader choice of insurance protection – to meet demand in the agricultural, saving, life and health microinsurance market – is recognized.
There are challenges in the microinsurance market needing to be overcome before the sector can fully develop, with clearer regulatory standards and improved infrastructure to be installed. There is also inadequate historical information surrounding risks and claims insurers may face in these new markets.
Multinational insurers embarking on the provision of microinsurance are faced with the challenge of establishing strong local partnership to distribute micro products and suitable channels for policyholders to make claims. Insurers also need to take into account the cultural element of local communities to ensure services and products meet the specific requirements of potential policyholders.
In July this year, the China Insurance Regulatory Commission (CIRC) reported that the world’s largest insurer by market value – China Life Insurance – had written nearly 4 million microinsurance policies, generating US$20.2 billion. China Life recently received regulatory approval by the CIRC to expand its microinsurance business in rural regions of China, which include Jiangsu, Hunan, Tibet, Zhejiang and Xinjiang – helping the insurer towards its goal of generating US$38 million in microinsurance premium income in 2010.
Allianz, one the world’s largest insurers, has been active in the microinsurance market for years and operates in countries such as India, Indonesia, Colombia, Egypt, Senegal and Cameroon. Allianz Indonesia has set a target this year to achieve 1 million policyholders by 2012. In India – Allianz’s largest microinsurance market – the insurer offers savings, property, life and health micro products and expects the market to continue to grow.
Non Government Organizations (NGOs), governments and local communities have been working on programmes across regions of the world where vulnerable communities and individuals require protection for their livelihood and well-being. Organizations such as the International Finance Corporation (IFC) recently committed US$4.1 million in grants for mircoinsurance in Eastern Africa. With the Swiss Re report highlighting the potential benefits of mircoinsurance on a commercial basis, insurers have the opportunity to develop policies to meet the protection needs of the more venerable element of the world’s population.
The fundamental basis for microinsurance to work for the insurer is a high volume of policyholders, coupled with low cost margins. Also, insurers will benefit from working with local partners with close ties to local institutions and communities to help mircoinsurance providers to establish a market presence.
Insurance Companies Mentioned:
Swiss Re
Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines – such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
Allianz
Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
China Life Insurance
China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.
Nov
30
US$4.1 Million Grant for Index Linked Insurance in Kenya and Rwanda
Filed Under Africa, Income Protection | 2 Comments
The International Finance Corporation (IFC) – a member of the World Bank Group – has awarded a US$4.1 million (€3.12 million) grant to support the provision of microinsurance in Eastern Africa. The grant will be awarded over the next three years to help 35,000 farmers and 5,000 livestock herders in Kenya and Rwanda.
The grants will be used to finance advisory services, building and infrastructure development and assistance to local insurance companies in the provision of index-based insurance products.
The agreement between the IFC and the regional grant partners is designed to expand access to insurance for Kenyan and Rwandan farmers and livestock herders in order to provide them with protection for their animals, crops and livelihoods against natural disasters and weather-related risks.
The IFC led programme – through the Global Index Insurance Facility (GIIF) – was established in 2009 to help in the development of index-linked insurance facilities in countries which currently have limited insurance resources available. The IFC grant, totaling roughly US$4.1 million (€3.12 million), will be shared between three schemes which include: MicroEnsure weather index insurance project in Rwanda; the Syngenta Foundation for Sustainable Agriculture/UAP Insurance weather index insurance initiative in Kenya and the International Livestock Research Institute (ILRI) Livestock index insurance project in northern Kenya.
The expected breakdown of the grant will see the Syngenta Foundation for Sustainable Agriculture receiving up to US$2.4 million (€1.8 million), which is planned to assist 20,000 farmers in Kenya with insurance protection over the next three years. US$154,000 (€117,540) of the IFC grant will be for the ILRI to help roughly 5,000 households in northern Kenya over the next two years and up to US$1.6 million (€1.2 million) will be for MicroEnsure to cover 15,000 farmers over the next three years in Rwanda.
IFC’s director for Eastern and Southern Africa, Jean Philippe Prosper said: “These partnerships highlight IFC’s commitment to expanding insurance and other financial products where they are needed most in Africa. The Global Index Insurance Facility will facilitate farmers’ access to credit, leading to increased productivity, improved livelihoods and greater food security. We are grateful to the donors that have generously provided funding and to our partners for supporting this programme.”
The establishment of the GIIF is designed to aid the development of local insurance companies and create capacity to provide index-based insurance products. Index-based insurance is designed to protect against catastrophic events taking into account the severity of the events such as droughts, flooding and wind storms and the damage they can cause. The significance of the form of index-linked insurance products proposed is that it will enable the verification of claims on a large scale rather than on an individual basis. This will lower transaction costs, making products and services more accessible in rural and remote regions.
The first donor to commit to the GIIF Trust Fund was the European Union (EU) which donated US$32 million(€24.5 million). Additional donations have been received from Japan’s Ministry of Finance with an initial offering of US$2 million (€1.5 million) and the Dutch Ministry of Foreign Affairs; these funds have been used to finance the initial project and establish the facilities required.
The IFC is the largest global development institution founded to focus on private sector involvement in developing countries. The IFC looks at ways to create opportunities for people to escape poverty and improve their lives. The global institution provides capital for businesses to assist employment and supply needed services by using funding from sponsoring parties. The IFC will also offer advisory services to ensure projects are developed effectively.
Oct
5
South Africa to Convene with UK Health Officials for Advice on NHI
Filed Under Africa, Health Insurance, Healthcare, Insurance Company, Medical Insurance, United Kingdom | 8 Comments
With the African National Congress (ANC) in South Africa, preparing to institute a National Health Insurance (NHI) program in the next few years, South African government health officials are set to meet with their UK counterparts to learn from their experiences.
The African National Congress released some of the details of their proposal for a National Health Insurance scheme towards the end of September, and the proposal is still being debated by the ANC’s National General Council. The intention is to create a modern single payer healthcare system which can provide adequate care to all South African citizens, regardless of ability to pay.
The South African National Health Insurance scheme, while still being adjusted, will start to be implemented in 2012, for which officials have budgeted ZAR 12 billion (USD 1.7 billion) in the first year. After its start date in 2012, the scheme is set to be rolled out in phases over the next 14 years, and will also include large investments in the nation’s healthcare infrastructure and medical professionals.
This week, South Africa’s health officials will be meeting with United Kingdom officials, including the former Chief Executive of the NHS, Lord Nigel Crisp, to share information and discuss how to maintain quality in the healthcare system. The Director General of South Africa’s National Department of Health, Precious Matoso, said over the weekend that the UK was “a good example of a country that has dealt successfully with problems of quality in the health care system.”
Lord Nigel Crisp will also be joined by Dr. Nicola Brewer, the British High Commissioner to South Africa for what has been described by the South African Government as an “international consultative workshop”. The meeting will be focused on trying to ensure public healthcare services maintain appropriate standards of quality and patient safety, while instituting an equitable and sustainable healthcare delivery system.
The South African Health Department has said that “We are cognisant of the fact that challenges in the delivery of health services are not unique to South Africa and that many lessons can be learnt from other countries that have experienced similar problems in the past and have turned the corner,”
During the meeting, the two sets of officials will endeavor to set benchmarks for standards in areas of priority to promote patient safety, namely preventing and controlling infections, reducing waiting times, working towards the availability of medicines, encouraging positive attitudes from healthcare workers, as well as instilling values and motivation in the healthcare workforce.
The Health Department of South Africa recognizes that “From previous discussions we have recognised the existence of gaps in our approach to ensuring that this (healthcare) right is achieved. These gaps include, amongst other things, infrastructure backlogs, challenges in implementing quality improvement strategies and accreditation programmes for our health facilities and human resource shortages.”
While these and other deliberations on the exact structure of the South African NHI are continuing, five of South Africa’s major hospitals will be undergoing large scale renovations in order to conform to the basic standards required by the NHI scheme. These include the Chris Hani Baragwanath Hospital in Johannesburg, George Mukhari Hospital, Limpopo Academic Hospital, King Edward Hospital in Durban and the Nelson Mandela Academic Hospital in the Eastern Cape.
Sep
27
Aetna Global Benefits expands Executive Healthcare Plan in Africa
Filed Under Aetna, Africa, Expat Insurance, Health Insurance, Medical Insurance | 8 Comments
Aetna Global Benefits (AGB) has announced a new international health insurance plan in Africa as part of their Executive Healthcare Plan lineup, targeted at regionally mobile individuals and groups.
Aetna Global Benefits offers the Executive Healthcare Plan (EHP) line of international health insurance products in partnership with Kenya-based medical insurance provider Executive Healthcare Solutions.
The Executive Healthcare Plans offer three coverage areas, which include the usual Worldwide and Worldwide excluding the U.S. areas of coverage, as well as Africa plus India, Bangladesh and Pakistan.
The new EHP Lifestyle plan includes a number of benefits over and above hospitalization and out-patient treatment, such as routine and restorative dental treatment up to US$ 1000, full refund for vaccinations and inoculations, routine management of chronic conditions, pregnancy and childbirth benefits, newborn cover including congenital anomalies, HIV/AIDS treatment, hormone replacement therapy, home nursing benefits, transportation of mortal remains or local burial costs, and hospital cash benefits.
Like other Executive Healthcare Plans, policyholders have access to Aetna Global Benefits’ Global Health Databank as well as the Health and Wellness Centre. AGB’s Global Health Databank offers the ability to look up medical facilities, medical translation services, city profiles and safety and security information from around the world. The Health and Wellness Centre offers users educational information and resources on health conditions in the region.
Stuart Leatherby, the Aetna Global Benefits Managing Director for the Middle East and Africa said “We are extremely pleased to offer an additional medical plan for customers in the region that provides increased benefits and benefit levels. This demonstrates our continued commitment to providing employers and individuals with a wide range of products and services to address their specific benefit or economic requirements.”
Insurance Companies Mentioned:
Aetna Global Benefits
Aetna Global Benefits, the international business segment of Aetna, is committed to helping create a stronger, healthier global community by delivering comprehensive health benefits and health management solutions worldwide. AGB’s expatriate business is one of the industry’s largest and most prominent US-based international health benefits providers, supporting more than 400,000 members worldwide. The organisation’s health management business collaborates with healthcare systems, government entities and plan sponsors around the world to design and build locally-applied health management solutions to improve health, quality and cost outcomes.
Executive Healthcare Solutions
Executive Healthcare Solutions is a well established Kenyan medical insurance provider, with over 50 years of experience in dealing with international insurance arrangements. Executive Healthcare Solutions has been actively participating in the international private medical insurance market for over 10 years. The company is Aetna Global Benefits and subsidiaries’ principal representative for the Executive Healthcare Plan in Africa, and currently has approximately 10,000 members across Africa.
Sep
24
South Africa National Health Insurance Scheme Commences in 2012
Filed Under Africa, Health Insurance, Healthcare, Medical Insurance | 331 Comments
South Africa’s ruling party, the African National Congress (ANC) has released more information regarding their plan to mandate universal access to healthcare through a National Health Insurance Scheme.
The Ministerial Advisory Committee on the NHI has produced a document providing a rough outline of the ANC’s National Health Insurance (NHI) scheme, which is ready to be submitted to the ANC National General Council (NGC) for debate. The ANC’s National Health Insurance plan aims to ensure access to healthcare is based on need rather than the ability to pay, with the intention of doing this through a single payer health insurance system. The initiative will take a community-centric approach, with a focus on local primary care networks rather than large-sized hospitals.
South Africa currently spends slightly more than 8% of GDP on healthcare every year, although most of that money is being spent through the private healthcare system, despite the fact that nearly 64% of the South African population relies upon the public system.
The new national health insurance program is expected to cost at least ZAR 128 billion (USD 18.1 billion) in the first year, rising to ZAR 376 billion (USD 53.15 billion) by 2025. Although according to Di McIntyre, the Director of the Health Economics Unit of the University of Cape Town, this would roughly equal the total amount spent on healthcare in South Africa. McIntyre also said that even with the NHI scheme and associated increases in healthcare use, hospital staff and resources over the next 10 to 15 years, healthcare expenditures would still remain at roughly 8% of GDP.
The South African treasury and the Ministerial Advisory Committee on the NHI, which is chaired by Dr. Olive Shisana, the CEO of the Human Science Research Council, has put forward a provisional model for funding the scheme, while they explore potential options. While the main source of revenue would be from South Africa’s general taxation, additional financing may be sought through a surcharge on taxable income, an increased value-added tax (VAT) dedicated to the NHI, payroll taxes for employers and employees, and removal of the presently existing tax credit for medical aids.
The first phase of the project will be rolled out in 2012, and will focus primarily on bringing services to areas with little or no access to quality healthcare. A number of other key areas of attention for the initial roll-out are being discussed in closed chambers by delegates at the NGC. These include investing and rebuilding the country’s public health infrastructure, developing human resources programs to fill the national shortage of qualified health workers, and establishing a national health fund that would be ensconced in the Ministry of Health but operate autonomously, much like the South African Revenue Service in the National Treasury.
Officials are also looking at electronic medical records, such as the e-health system that Singapore has been developing, as a way to manage to reduce the associated management costs of the healthcare system. Members of the Ministerial Advisory Committee were also quick to point out that affluent South Africans would still be able to use private healthcare, through the purchase of private medical insurance and use of private hospitals.
As the Ministerial Advisory Committee has now submitted their proposed program to the ANC National General Council for debate, it will be interesting to see how the continuing process, as government officials are encouraging input from stakeholders in the debate, with ANC Spokesperson Jackson Mthembu saying “If there is one organisation that likes to have people involved in what it does, that’s the ANC. We welcome your contributions on this matter.”
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