FIRST Mutual Holdings Limited (FMHL) will take reinsurance cover to ease the impact of aggregation of small claims, an official has said.
BY VICTORIA MTOMBA
Speaking on Thursday at the company’s analyst briefing, group chief executive officer Douglas Hoto said the approach was appropriate for the Zimbabwean market because it was difficult in this environment to increase contributions by members to reduce the adverse claims.
“Under the reinsurance arrangement, some of the premium is going to be passed to reinsurance companies. When claims exceed a certain value, the company will be able to claim from the reinsurers to settle those claims above the threshold. This will reduce the quantum of money directly settled by the company thereby reducing the claims ratio,” Hoto said.
“Health care claims are not big but they are frequent. Health care needs reinsurance. Health care claims are not big but their frequency is a problem. We will insure against large number of small claims. It is a development not common in this market,” he said.
Hoto said the measures included aligning the benefits paid to the members to the premiums being paid.
This has resulted in reduction in the awards to the members for certain services they get from health care service providers.
FMHL recorded a loss of $5 million during the full year to December 2014 compared to a profit of $6 million in 2013 due to higher claims that it incurred in 2014.
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The group’s total expenditure increased by $10,9 million to $114,7 million compared to 2013.
“The increase in total expenditure was partially due to the upturn in total claims which increased by 41% to $70 million compared to $49,8 million due to higher claims ratio in the health business, increased retrenchment and retirement withdrawals in the life company amounting to $44,9 million and $5,8 million respectively,” the company said.
For the full year ended December 31, 2014, Gross Premium Written (GPW) for the group went up by 14% to $115,3 million due to the good performance of the health and insurance businesses.
The GPW rose from the 2013 figure of $101 million. Hoto also said the company’s subsidiary First Mutual Health Company was the largest contributor to GPW after it increased to $50,1 million from the 2014 figure of $43 million on the back of increased membership. GPW is total premium written and assumed by an insurer before deductions for reinsurance and ceding commissions. The First Mutual Health Company membership grew to 117 509 compared to 107 796 same period last year.
Hoto said although the membership grew, the average monthly premium per member for the year came down to $37,86 from $39,84 during the period under review.
