The general insurance sector in Fiji has maintained a positive performance in 2023, growing 8%.
Despite facing challenges such as rising claims costs and increasing competition, the sector showed resilience and is poised for continued progress, according to the Reserve Bank of Fiji’s (RBF) 2023 Insurance Annual Report, which was tabled in parliament recently.
The report stated that total combined assets of the life and general insurance sectors increased by 7.9% to FJ$2.7 billion, representing 9.2% of the gross assets of the Fijian financial system.
It continued: “The domestic gross premium pool continued to grow… to FJ$440.7 million, on the back of increased underwriting activity. The combined profitability of the Fijian insurance industry however, declined to FJ$33 million over the year, attributed to the increase in total outgoings and net claims paid during the year.”
The sector recorded a 10.3% increase in gross premium income, reaching FJ$243.9 million in 2023. This growth follows a period of recovery after the COVID-19 pandemic, which significantly impacted the market in 2020 and 2021.
The absence of any large-scale natural disasters in the period and increasing household incomes also helped. The fire, medical, and motor vehicle insurance classes remained the dominant contributors, accounting for 77.5% of the sector’s total gross premiums. The fire class recorded the highest growth, rising by 13.5% to FJ$77.2 million.
The insurance industry’s assets include Government securities, bank deposits, and investments in shares.
Liabilities were made up of the balance of revenue account for life insurers, and underwriting provisions for the general insurance sector.
The sector did face some challenges in the reporting period. Claims payouts saw a significant jump of 26.4%, reaching FJ$132.4 million in 2023. Much of this increase was driven by higher claims in the medical, fire, and motor vehicle classes.
This has raised concerns about the growing costs of claims, which continue to put pressure on insurers’ profitability. Increasing reinsurance costs and challenges with affordability could also hamper the Fijian insurance industry’s future earnings performance, the Reserve Bank observes.
Other emerging risks to this outlook continue to be climate related disasters and cyber threats.
Speaking to the report in parliament, Deputy Prime Minister Biman Prasad referenced challenges relating to health insurance, particularly the move away from bulk billing, and subsequent difficulties and time it can take for some people to receive reimbursement for payments they make for medical procedures.
He flagged the review of the Insurance Act to ensure ‘flexibility, efficiency and effectiveness’ in the sector.
Despite these concerns, the RBF says the sector remains a critical part of Fiji’s economy. The insurance penetration rate, a measure of the industry’s reach, stood at 3.5% of GDP in 2023, consistent with the past two decades. While this indicates stable demand, it also shows room for growth, especially in underserved regions.
Predictions for 2025: A year of transformation and opportunities
Looking ahead, the sector is expected to expand by 5-7% in 2025, with further diversification of products to cater to evolving consumer needs. There is a strong emphasis on enhancing digital transformation to streamline processes and improve customer engagement.
Furthermore, the report predicts that the penetration rate will continue to show a gradual increase especially as more rural and underserved markets are tapped. The push towards micro-insurance products aimed at low-income communities is expected to make insurance more accessible and affordable, potentially raising the penetration rate to 3.8% of GDP by 2025.
However, the Reserve Bank also cautions that insurers will need to adapt to changing risk environments, particularly as climate-related risks increase.
Additionally, competition in the sector is expected to intensify in 2025, particularly with the potential entry of new players and alternative risk financing models. This will challenge existing insurers to remain competitive by offering more value-added services, better customer experiences, and innovative pricing structures.
As the sector adapts to these challenges, affordability remains a significant concern. The reports notes that while growth is expected, insurers will need to balance rising claims costs with affordable premiums for consumers.
Implementing more risk-based pricing and better understanding among consumers about the importance of adequate insurance coverage will be key strategies in ensuring sustainable growth.
