Encashments are climbing as local life insurance policyholders remove accumulated savings to cope with financial challenges.
Orville Johnson, general manager of the Insurance Association of Jamaica (IAJ), told the Financial Gleaner on Wednesday that policy encash-ment for the period January to July 2013 has jumped by 13 per cent. He said Jamaicans collected J$5.8 billion during the period from investment-linked policies.
Johnson said that 60 per cent of all policies sold are investment linked, adding that "in difficult times, people will draw down on cash-surrender value because it is harder to get loans."
Other plans for money
He said, however, that did not mean all the money was taken out for payment of bills and other day-to-day needs. The remainder is used for education, retirement and real-estate purchases. "It (the insurance policy) is a long-term savings vehicle, quite apart from death and health (insurance)," Johnson explained.
In 2012, encashments from individual life policies was up four per cent to J$9.2 billion when compared with those made in 2011.
Nevertheless, Jamaicans continue to buy more life insurance, which industry insiders say is linked to expectations of living longer.
New business written between January and July 2013 totalled J$2.6 billion, up 10 per cent over the corresponding period in 2011, Johnson said. For the period, gross premiums totalled J$16.7 billion, a six per cent improvement over the same period last year.
The life insurance industry makes most of its money from individual life policies sold, accounting for approximately 70 per cent of revenue. The remainder comprise group business, including group pensions, group life and group health.
"New annualised individual life sales were up by 13 per cent last year despite the sales force slipping marginally by four to 822," Johnson said.
Policyholders and beneficiaries were paid J$19.9 billion in benefits in 2012.