Economic ExpertSpeak: Online sale of insurance products to increase in Mauritius
Kushal Lobine, the chairman of Mauritius financial services and insurance major SICOM, spoke to AfricaMoney on how there are a relatively large number of players for the market size, making the Mauritian insurance market a very competitive one. (Image: Company)
Kushal Lobine, the chairman of Mauritius financial services and insurance major SICOM, spoke to AfricaMoney on how the local insurance market is a very competitive one. Our economic expert noted that there are a relatively large number of players for the market size, prompting major players to look beyond island shores for more business opportunities. The chairman of the State Insurance Company of Mauritius also stressed the important role that ICT is playing in the sector, stating that online sale of insurance products is expected see a spurt in the near future.
Edited excerpts from an exclusive interview:
Consolidated results of SICOM Group for the year ending 30 June 2013 showed a marked increase in profit at Rs 559 million compared to Rs 474.4 million in 2012, despite the economic uncertainty and strong competition in the insurance market. Can you comment on some of the factors behind the same?
The profit before tax of the SICOM Group increased from Rs 474.4 million for the year ended 30 June 2012 to Rs 559 million for the year ended 30 June 2013 due to the overall good performance of the business units; an increase in the investment income including a revaluation gain on investment property; the good performance achieved by its subsidiary companies; and a general containment of costs at all levels.
Overall, the year was good as not only did the group pull in a great performance but at a company level too, profits increased from Rs 365.9 million in 2012 to Rs 492.0 million in 2013.
One of the subsidiaries show a slight decrease in profitability, against the good performance overall. What was the reason for the same?
One of our subsidiaries, SICOM General Insurance Ltd, was impacted by unexpected events such as a flashflood and a major road accident last year and its profitability decreased slightly from Rs 87.9 million before taxes in 2013 against Rs 90.2 million in 2012.
Is the group on track to achieve its target for 2014? Can you highlight some noteworthy achievements this fiscal year?
The financial statements for the year ended 30 June 2014 are currently being audited and will be finalized by September 2014.
In line with the measures set out in its 3-year Strategy Plan to continuously enhance its customer service levels and increase its profitability, the SICOM Group has continued along its strategy of diversification and consolidation by introducing new products and services, investing in new sectors for growth and in Information Communication Technology (ICT) applications and platforms, exploring regional expansion avenues and reviewing of critical processes, among other initiatives.
SICOM also set up its Foundation for Corporate Social Responsibility activities, which were mainly geared towards socio-economic development, social housing, welfare of vulnerable children and education, health and non-communicable diseases, eradication of poverty, leisure and sports, and catastrophe.
Life insurance is going through a difficult environment, where the savings rate has experienced a significant drop from 21.5% in 2007 to 15% in 2012. Can you give your views on the factors behind the low savings rate, and what steps could be taken to boost the same?
The low savings is mainly due to the persistently low interest rates on savings coupled with an inflation rate exceeding savings rate. This situation does not encourage savings and explains the current situation
In terms of steps that could be taken to boost savings, we have seen that the Government has recently launched two 5-years Government Saving Bonds aimed at individual investors. This is a positive sign and we believe that the funds earmarked for this will be subscribed quite rapidly.
The reintroduction of fiscal incentives to further encourage individuals to save in the various financial instruments including Unit Trusts, Life assurance and Personal Pension products could be considered by the Government. This would be in the same spirit as the Government Bonds recently launched and would also be a continuity of the recent fiscal incentive introduced to encourage private medical insurance.
SICOM launched a new life insurance plan SICOM G3 + in 2013. Can you mention some highlights of this product? Are there any new products lined up for 2014 that you can tell us more about?
SICOM G3+ is an innovative ‘all in one’ product with distinctive features including guaranteed maturity benefits at 1.5 times the sum assured and cover for 13 serious illnesses, among others. Cancer and heart related diseases are included in the list and benefits become payable upon diagnosis of one of these illnesses. A special cover for angioplasty treatment is also included. All this is provided over and above the death and disability covers you normally find in the usual life assurance products. What makes this product particularly attractive is that it has been specially crafted to comprehensively address the real concerns of the public by offering guaranteed returns in a context of low interest savings rates and prevalence of serious illnesses such as cancer.
Well, coming to the second part of your question, we have also started working on other new products but it would be premature to provide details at this stage.
How has your experience been with the regulator of the insurance sector, the Financial Services Commission, and any wish-list from them in terms of what more they can do to boost the insurance sector?
I would like to take this opportunity to recognize the on-going work done by the FSC in promoting the protection of the policyholder and the public, such as the setting-up of a compensation fund for victims of hit-and-run accidents and the introduction of competency standards for salespersons. In this spirit, we have collaborated on various initiatives of the FSC either through our trade association, the Insurers’ Association of Mauritius, or directly.
Can you please give your views on the insurance sector in Mauritius?
The local insurance market is a very competitive one, given the relatively large number of players for the market size. Scope for business growth is becoming limited and it is not surprising that the major players are now looking beyond our island shores for business expansion. More and more business is now being introduced through intermediaries, in particular through brokers, as far as General Insurance business is concerned. Besides, online sale of products is expected to have an increasing number of adherents in the near future.
Finally, your views on the Mauritian economy and the way forward.
In its June 2014 National Account Estimates, Statistics Mauritius has forecast a GDP growth of 3.5% for 2014, which is higher than that of 2013 where GDP growth stood at 3.2%. In general, it is expected that economic activities should pick up in line with the improving economic conditions of the main trading-partners of Mauritius.
Going forward, to increase the growth rate of the economy and to pave the way for Mauritius to become a high income country, major challenges lie ahead of us to build on the significant advances already made. These challenges include further efforts to enhance the ease of doing business and to promote innovation and productivity, the diversification of our exports markets, the continued and sustained development of SMEs, as well as an upgrading of international connectivity – whether it be in relation to the seaport, air flights or the internet.