THE Insurance and Pensions Commission (Ipec) is expecting prices of insurance products to come down following revelation that the mortality rate in the country was overstated.
Life insurance is based on the sharing of the risk of death by a large group of people. The number at risk must be known to ascribe the cost to each member of the group.
Mortality tables are used to give the company a basic estimate of how much it will need to pay for death claims each year.
Ipec commissioned the Zimbabwe Mortality Tables Project in 2020 to develop specific tables for the country’s insurance and pensions industry.
Zimbabwe’s insurance and pensions industry has largely relied on mortality tables developed in other jurisdictions such as South Africa and the United Kingdom, in pricing and reserving various products.
Speaking on the sidelines of a workshop to present the results of the mortality study to stakeholders marking the end of the project Ipec commissioner Grace Muradzikwa told NewsDay that the major finding of the project was that people were actually living longer.
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“The major finding from the mortality table research is that mortality is actually lighter than what we assumed. Where we were thinking that people are dying earlier, it’s the opposite, people are actually living longer,” she said.
“With that finding, the pricing of insurance products should come down. We are expecting that there will be an increase in the uptake of insurance once the pricing is revised.”
Insurance uptake has been very low in Zimbabwe partly due to affordability issues.
The long life expectancy mean that pension contributors will be paying benefits for a longer time, which effectively will make it more affordable to take up a pension scheme.
Muradzikwa said Zimbabwe’s mortality tables provided a much more accurate estimation of life expectancy and mortality rates in Zimbabwe compared to foreign tables.
“The commission believes that having Zimbabwe-specific tables will result in more accurate pricing of insurance products as well as enhanced reserving, hence general improvement in financial soundness, vibrancy and safety of the insurance and pensions industry.
“The commission also expects an increase in uptake of insurance and pension products when the tables being presented today are applied to the letter and spirit,” she said.
Muradzikwa added that using tables from other countries was not accurately reflecting Zimbabwe’s experiences due to differences in socio-economic and demographic situations.
“Mortality changes over time due to new lifestyles, working habits, and medical advancements. These changes are broadly country-specific, which makes it difficult to adopt the experiences of other countries.
“There is potential for over- or undercharging of insurance products, which may affect insurance uptake in the country. Over or under reserving for products may negatively affect the overall risk and solvency management for insurance companies and pension funds.
“Alive to these challenges, we took a bold decision to facilitate the development of our own tables primarily leveraging on our local expertise and resources,” she added.