Insurance claims on the rise due to Covid-19
The insurance industry has experienced a surge in claims, largely due to Covid-19, with the situation unlikely to change any time soon.
In a statement accompanying the financial results for the half-year period, Botswana Insurance Holdings Limited (BIHL) CEO, Catherine Lesetedi revealed there has been an increase in claims due to general excess and mortality and Covid-19.
Lesetedi grimly noted that the uncertainty surrounding the arrival of vaccines means the situation is likely to continue for a while.
“The unprecedented level of excess mortality presents risks to the business. Management will be implementing appropriate actions to mitigate this risk to ensure the group’s value proposition remains sound going into the future,” stated the Chief Executive Officer.
According to Lesetedi, the risk-mitigating measures include driving profitable top-line growth to ensure the business navigates the current wave while delivering support to its policyholders.
During the six-month period under review, the listed insurance group, which is the parent company to Botswana Life, experienced an unprecedented 48 percent year-on-year decline in operating profit to P102 million.
“The major contributor to the decline in operating profit was the unprecedented excess mortality experienced during the period. P119 million worth of claims were classified as Covid-19 claims across the different product lines, representing 29 percent of the total claims,” outlined Lesetedi.
The net insurance claims and benefits paid during the half-year period are said to have increased by 44 percent compared to the corresponding six months.
Due to the massive drop in profits, BIHL shareholders will go home empty-handed as management has resolved not to award an interim dividend.
Lesetedi explained the decision was based on the need to preserve cash for the life business to deal with any further shocks that might arise from the Covid-19 pandemic.
The group anticipates the impacts of the pandemic will continue to be felt in its operations and new business for the rest of the year.