Zimbabwe has an insurance problem. Too few of its people or business are insured, and without corrective measures, the situation will only get worse and make economic recovery difficult.

The latest quarterly report by the Insurance and Pensions Commission of Zimbabwe (Ipec) shows that the sector is facing an existential crisis reflecting the poor economic situation in the country.

According to Ipec, 356 055 insurance policies lapsed in the final quarter of last year, nearly 20% of total policies, as policyholders failed to keep pace with rising premiums that are bidding to keep pace with high inflation and changing fundamentals.

About 2,1 million more insurance policies are under threat of lapsing, indicating ‘that more policyholders are failing to maintain their policies, a situation that may be linked to a volatile economic environment that was experienced during the greater part of 2022.”

Zimbabwe's economy is in the perfect storm of high inflation, currency instability, power outages and volatile exchange rates.

The southern African nation’s economy is fast dollarising as businesses move away from the confidence crisis around the local Zimdollar currency, a problem Zimbabweans know only too well.

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Since the turn of the millennium, the country has experimented with various forms of legal tender, such as bearer cheques, bond notes, agro bills among others as the local currency failed to stem the tide of hyperinflation which hit a zenith of 500 billion percent in December 2008, destroying savings and pensions.

The country has struggled to recover from that and the situation was made worse by the reintroduction of the Zimdollar in June 2019 after a decade of the multicurrency regime stabilised key fundamentals.

Zimbabweans, have already lost savings and pensions twice, the second time when the government converted United States dollar into the newly reintroduced local currency back in 2019.

Last year, the government made the greenback, and other foreign currencies legal tender again, but uncertainty remains high.

Insurance penetration remains poor, indicating low confidence in the sector and the economic direction of the country.

Faced with declining business and a very real existential threat, Zimbabwe’s insurance companies are cannibalising each other in a brutal price war that could lead to a collapse of the sector or companies failing to meet their obligations.

According to the Insurance Council of Zimbabwe (ICZ), Zimbabwe’s insurance penetration rate is at 2,6%, much lower than regional average.

Here is how a United Kingdom-based Insurance firm, Lloyd's, describes the necessity of insurance in a 2018 report: “Insurance policies create confidence, encourage innovation and enterprise, and ultimately enable human progress. For example, an 18th-century businessman was far more likely to invest their money in shipping fleets to trade globally once they had insurance in place and weren’t just one storm away from financial ruin.

Today’s commercial space operations wouldn’t be able to lift off without insurance backing their expensive cargo.

Conversely, where insurance is not available or has not been purchased, catastrophes can have major impacts on economies and lives.

Assets such as schools, hospitals, businesses and infrastructure must be rebuilt after major disasters.

Without insurance, this burden is often borne by the individuals affected who have lost their homes and livelihoods, the businesses whose factories and warehouses are damaged, and by governments that have to support them. If these assets are insured, it’s private not public money that foots the bill.”

Zimbabweans either do not see the value of insurance, or the cost of being insured is just too high. Either way, authorities need to act to prevent a catastrophe.