BIHL’s short term insurance continues to suffer

07th September 2017
SUBSIDIARY HEADACHE: Cathrine Letebele-Letegele Source:The Midweek Sun

The first half of 2017 has seen a continuation of challenging market conditions for the short-term insurance at Botswana Insurance Holdings Limited (BIHL) group as it continues to experience a significant decline in new business. The Group led by Cathrine Letebele-Letegele, indicates in its recently released half year results, that in addition to the decline in new business, there has also been a rise in policy cancellations.

Many of the cancellations emanate from clients experiencing financial constraints, which have made it difficult for them to continue with their Legal Guard policies, according to the group executives. “This has impacted revenue negatively with premium income being 1.4 percent lower than for the same period last year,” reads the results statement. During the first half of the year, Legal Guard together with its sister company, Botswana Life Insurance Limited (BLIL), embarked on and concluded a restructuring exercise.

At the time, management indicated that it had become imperative to align the business’ cost base to levels more appropriate to a business of the size and nature of Legal Guard and thereby improve the company’s ability to achieve sustainable profitability. Legal Guard achieved an operating loss of P0.9 million for the first six months of 2017.

The main cause of this outturn was a once off P2.1 million cost incurred as part of the restructuring exercise completed on June 2017. Despite these negatives, the first half of 2017 saw a significant achievement for the business with the go-live of its new core operating system in April 2017. The system is expected to improve revenue stability going forward as well as provide an enhanced platform for claims administration.

The system will also facilitate internal process efficiency improvements and the division’s quality of decision making information which will, in turn, reduce the business’ cost ratios, whilst also, releasing resources to focus on customer experience improvements. During the 2015/16 financial year, group reported on its 2016 year end results that the business effected a change in accounting for claims, resulting in an increase in outstanding claims reserves of P2.7 million.

This change, which was made to bring the business in line with recommended best practice by the insurance industry regulator, significantly impacted the profit for the year. However, at the time, General Manager Mike Dube indicated that, the business considered this as a prudent move and its benefits will be felt going forward. Meanwhile, in trying to turnaround the short term insurance business, the management has embarked on an exercise focused on improving the productivity of the distribution force and this is expected to impact new business going forward. According to management, however, for 2017 uncertainty in both the local and global markets is expected to continue to affect the results.

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