By George Jude,
ContributorTHERE HAS been an increase of 21 per cent in annualised premiums of life insurance companies for the first two months of this year prompting industry players to predict an overall increase this year over 2000.
Of the increase in the industry's annualised premiums for the first two months of this year over the same period last year, Island Life fared the best with an increase of 194 per cent from J$8.5 million to J$25 million.
Guardian Life doubled its annualised premium from J$24 million last year to J$48 million this year. Scotia Life's increase was 13 per cent from J$46 million to J$52 million, while OMNI's annualised premium grew by 28.2 per cent from J$23.4 million to J$30 million. Life of Jamaica's annualised premium fell by 16 per cent from J$37 million to J$31million.
President of the Life Insurance Companies Association of Jamaica (LICA) and general manager of OMNI Orville Johnson expressed cautious optimism about the likely increase in premiums.
In an interview with the Financial Gleaner, Mr. Johnson said: "I'm cautiously optimistic that the level of life insurance premiums will increase this year as it did last year. We have already seen a rise in premium in the first two months of this year over the same period last year".
Mr. Johnson attributed the optimism in the life insurance industry to its continued strong path to recovery since 1999 and the current positive developments taking place in the life insurance industry.
PREMIUMS
According to LICA data, annualised premium in the life insurance industry increased from J$747.76 million in 1999 to approximately J$1.07 billion in 2000, an increase of 43 per cent. The face amount of these policies increased from J$18.65 billion in 1999 to J$29.06 billion in 2000, an increase of 56 per cent.
Mr. Johnson contends that "the 56 per cent increase in the sum assured is indicative of the return to the business of providing financial protection when individuals die, while still continuing to mobilise long term savings for those who retire and out-live their income".
The number of policies sold last year increased by 19 per cent to 56,529 compared with 47,325 the previous year. Gross premium income from all individual life policies increased by 35 per cent in 2000 to J$6.39 billion compared with J$4.75 billion in 1999. The 2000 gross premium was set against disbursements of J$2.37 billion," a strong indication of positive change in the industry", Mr. Johnson said.
In January - February this year, annualised premium has increased by 21 per cent to J$200.64 million compared with J$165.76 million in the same period in 2000. In addition, the face amount of these policies increased by 59 per cent to J$5.48 billion in the two months of this year compared with J$3.45 billion for the corresponding period in 2000. The number of policies sold increased by 13 per cent to 9,999 compared with 8,827 billion for the same review period of last year.
For the first two months of 2001, gross premium income increased by 22 per cent to J$1.1 billion compared with J$0.9 billion in the same period in 2000. The January- February 2001 gross premium was against cash disbursements of J$396 million, representing positive change.
Mr. Johnson said, "People continue to regain confidence in the life insurance sector, which has been boosted by the entry of the new players Barbados Mutual and Guardian Life of Trinidad & Tobago in the market and the additional investments which they bring. The new entrants have been doing heavy recruiting, and advertising by the sector has been on the increase all of which will give life insurance companies a strong presence in the local insurance market." The data from LICA shows that the number of sales representatives in the life insurance industry increased last year by 30 per cent to 680 from 522 in 1999. And in January to February this year, the number of sales representatives increased by 12 per cent to 688 compared with 614 for the same period in 1999.
HIGHER SALES
Assistant vice president in charge of communications at Life of Jamaica, Thomas James also believes that life insurance companies will take in more premiums this year. He said: "Sales are likely to be much higher this year than they were last year".
He noted, "The reality of the need for persons to cater for their future is becoming more apparent particularly in an environment of high levels of crime, and high cost of education and medical care".
Mr. Thomas supported the view held by Mr. Johnson that an increasing number of persons were taking policies which gave them benefits immediately upon being diagnosed with a terminal illness. Mr. Thomas said the new impetus of the industry will carry it forward into the immediate future.
Sales and marketing manager at Guardian Life, Emma Thomas also believes that increases in life insurance premiums experienced since 1999, will continue into 2001.
She added that "manpower in the industry was increasing and new products were coming onto the market" There is much speculation as to just how effective changes made by the forthcoming new Insurance Act will affect the life insurance industry in Jamaica. There are proposals that the new regulations will require life insurance companies to segregate their interest-sensitive, investment-type policies from their other insurance portfolios.
RESTRUCTURING
The life insurance industry has emerged from a restructuring period, which was precipitated by the fall in market price of real estate property between 1996 and 1998. This lead to a fall in the asset value of many insurance companies. Faced with a miss- match of assets and liabilities, five of Jamaica's largest life insurance companies, Crown Eagle Life Insurance Company Dyoll Life Jamaica Mutual Life Assurance Society Island Life Insurance Company and Life of Jamaica Limited (LOJ) were taken over by the Financial Sector Adjustment Company (FINSAC), the vehicle through which the government intervened to restructure the balance sheet of failed financial institutions and rehabilitate the financial sector.
FINSAC first intervened in the insurance sector in 1997/98 through the purchase of common and preferred shares and/or subordinated loans in all five insurance companies with it forced to make further interventions in Doyll Life, Crown Eagle and Mutual Life the following year. In December 1998, FINSAC transferred all Dyoll Life policyholder liabilities to Crown Eagle. At the same time a new company - Independent Life Insurance Company (Independent Life) was formed as a platform for integrating the traditional life, and equity-linked portfolios of all the companies.
In May 1999, FINSAC sold its remaining interest in Doyll Life, Crown Eagle and Mutual Life. The companies had come under increasing liquidity pressure from policyholders cashing in their interest sensitive policies, which required viable arrangements to be made for these portfolios, according to FINSAC's 1999 annual report.
Guardian Holdings of Trinidad & Tobago won the bid for the individual life and pension portfolios of Mutual Life and local company, First Life, won the bid for the group life and health portfolios of all three companies(Dyoll, Mutual and Crown Eagle). The total price for all the remaining shares of the three life insurance entities came to J$1.3 Billion.
Today, all the FINSAC-intervened life insurance companies, with the exception of LOJ, stalled by a court order last week have now been sold.
