The country’s Largest insurance firm, Botswana Insurance Holdings Limited (BIHL) has suffered from cancellations of insurance cover by individual policy holders during the 2017 reporting period, resulting from reduced disposable income and failure to afford insurance cover.
BIHL Group chairperson Batsho Dambe-Groth said in the 2017 annual report that one of the major challenges experienced by the BIHL Group of companies is the contraction of disposable income for Batswana who therefore seek to reduce their monthly financial commitments.
“Unfortunately, there is a widespread misconception that reducing or cancelling insurance cover, both long-term and short-term, is an easy way to ease pressure on household budgets,” she said. To her, this naturally has a knock-on effect, particularly for Botswana Life Insurance Limited, Legal Guard and Botswana Insurance Company (BIC).
“We are doing everything possible to educate consumers about the importance of insurance and how the short-term benefit of a slightly higher cash flow could be eliminated in minutes should something occur while they are un- or under-insured. On the life insurance side, consumers also fail to take into consideration the higher costs of reinstating policies or obtaining cover later when their cash flow improves,” she said.
The reality in Botswana is that average earnings in Botswana have remained stagnant at around P5000, way below the cost of living, according to the National Accounts Office, and government has been reluctant to adjust minimum wages.
Between 2015 and 2016, Botswana Multi-Topic Household survey conducted by Statistics Botswana found that consumption patterns as per the classification of Individual Consumption by Purpose showed that at national level, households allocate significant proportions of their consumption expenditure to Transport, at 23.9 percent. Anna Majalentle, the Statistician General revealed further that expenditure for housing costs and food was at 17.8 percent and 12.8 percent respectively.
So over half of their spending goes towards necessities , top 3 being transport; housing, and food. Further, Botswana grapples with high unemployment rates, especially amongst young people.
According to the BIHL chair, the first six months of 2017 was a very difficult period for the life business, Botswana Life Insurance Limited (BLIL) the Group’s largest operation and contributor. She said the Company missed several of its targets, particularly in the first half of the year. However, things improved in the latter part of the year, led by a significant upturn in sales. This enabled it to turn in final results that were commendable given the situation at the half-year. Although the value of new life business decreased by 8 percent to P149 million compared to the prior year, she said BLIL’s operating profit for the year remained steady, apart from the once-off separation costs that emanated from a mid-year restructuring exercise. This resulted in an 8 percent decline in the business’s overall operating profits.
Legal Guard ended what had been yet another extremely difficult year on a positive note, recording an operating profit of P1.3 million compared to P0.5 million in the prior year.
Botswana Insurance Fund Management (Bifm), the asset management side of BIHL, achieved pleasing results for the year 2017. Operating profit increased by 18% year on year. Assets Under Management for the year were P26.7 billion compared to P25.9 billion at the close of the prior year
BIHL group’s profit for the period also took a knock, declining from 475 million in 2016 to P349 million in 2017.