AS 2024 comes to an end, short-term insurers are under pressure to re-strategise over the government’s intention to control third-party insurance, it has emerged.
In the 2024 National Budget statement, Treasury noted that given the rise in the number of car accidents, it would assume third-party motor vehicle insurance for private and public motor vehicles.
However, to this day, local players are yet to receive any details on how this takeover will occur.
This State-sponsored scheme would essentially assume the responsibility of underwriting compulsory vehicle liability insurance, currently handled by private insurers.
Hence, these regulations are expected to see private insurers relinquishing their role in underwriting third-party motor vehicle insurance, which is compulsory in terms of the Road Traffic Act.
Third-party motor insurance is a type of insurance cover where the insurer offers protection against damage to the third-party vehicle, personal property and physical injury.
According to the Insurance and Pensions Commission’s (Ipec) Q2 Short-term Insurance Report, third-party insurance has been a major driver of the industry’s revenue.
For the quarter, third-party insurance earned the insurance industry ZiG585,3 million, translating to 49% of the sector’s earnings.
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Available data shows short-term insurers had a total of 419 818 policies at the end of June.
During the second quarter, 167 054 policies were underwritten, while 121 491 expired or were cancelled.
Ipec reported that the majority of policies reported during the half year were under the motor line of business, totalling 372 237, 89% of the total policies.
In an interview, Ipec insurance and micro insurance director Sibongile Siwela said following the government’s pronouncement, short-term insurers needed to focus on another income stream.
“When we talk about insurance and the momentum of it being taken away, I think it is a very sad story because only less than 5% is comprehensive insurance. The rest is State cash,” she said.
“So, insurers need to be asking themselves questions like, ‘if that class is taken away, what are the strategies they put in place?’
“I’m challenging insurers to strategise because they have been warned sufficiently. We can wake up one morning and it is gone.”
She said there were some businesses that were writing up to 98% in third-party motor insurance.
Thus, should the government go ahead with its plans, such businesses will close.
“So, it means that for insurers, most of their business will be taken away. And there are also some insurers who write 98% third-party,” Siwela said.
“So, those ones, in some of our business, they’ll be forced to close down, so re-strategising is the only way for the industry to survive.”
Insurance Institute of Zimbabwe general manager Davison Choeni echoed Siwela’s warnings.
He said there was a stream of strategies that the sector could employ, which include diversification, enhanced customer engagement and investment in technology, among others.
“The industry should develop a wider range of insurance products to appeal to different market segments, reducing reliance on third-party insurance,” Choeni said.
“It also needs to build strong relationships with customers through personalised services and effective communication can foster loyalty.
“On the other hand, utilising technology for better risk assessment, claims processing and customer service can improve efficiency and customer satisfaction.”
He added that the sector could also embark on advocacy and lobbying.
This implies engaging with government stakeholders to advocate for the interests of the industry and ensure that any changes in regulation consider the impacts on existing businesses.
Choeni said informing consumers about the value and benefits of traditional insurance products compared to alternatives could also help retain market share.
“The industry may face significant challenges without third-party insurance, as it often represents a substantial revenue stream,” he said.
“However, with the right strategies in place, such as diversification and innovation, it is possible to survive, although it may be more challenging.”
