THE insurance and pensions industry plays a vital role in providing financial security to individuals and businesses, offering a safety net against unforeseen losses and a promise of a secure retirement.
Insurance, for instance, provides financial protection against various risks, such as accidents, illnesses, and natural disasters, reducing the financial burden on policyholders.
Pensions represent a promise of a secure retirement, allowing individuals to enjoy the fruits of their labour with dignity and peace of mind.
As such, the importance of this industry cannot be overstated, as it provides a foundation for financial stability and security.
Insurance and Pensions Commission (Ipec) commissioner Grace Muradzikwa said the sector is a cornerstone of financial security for individuals and businesses alike.
“Insurance represents a promise that if a loss occurs, the insurer will be on hand to reduce the financial burden to the policyholder while pension represents a promise made to individuals after years of hard work, ensuring that they can retire with dignity and peace of mind,” she said at the launch of the 2024 insurance and pensions journalists’ mentorship programme recently.
“While this industry is crucial for financial security, the perceived complexity about insurance and pensions leaves consumers vulnerable to misinformation and disinformation. “
Old Mutual Insurance Company managing director Gloria Zvaravanhu told Standardbusiness that insurance protects individuals and businesses from significant risks such as property damage, liability claims, and business interruptions.
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Essential insurance products for individuals include homeowners, motor, travel and personal liability insurance, while businesses rely on commercial property, general liability, commercial motor, business interruption, product liability, and goods in transit insurance.
In Zimbabwe, she noted that individuals predominantly take insurance covers for their motor vehicles but there is low uptake on house insurance.
“With climate change induced risks and increased incidents of fires, this becomes extremely critical, and most homeowners have started realising this escalating risk and seeking cover,” she said.
“These insurance products provide financial stability by covering repair and replacement costs, legal fees, medical expenses, and lost income. For businesses, they ensure quick recovery from property damage, shield against operational liabilities, and maintain income during disruptions.”
Zvaravanhu said emerging technologies such as insurtech were enhancing the accessibility and efficiency of these products. Digital platforms and mobile apps simplify obtaining quotes, comparing policies, and purchasing insurance, she said.
Artificial intelligence and chatbots offer instant support and personalised recommendations for insurance covers, while telematics enables usage-based insurance, offering more affordable and personalised coverage.
“Blockchain technology ensures secure, transparent transactions and speeds up claims processing. All these technologies are now being used by leading insurers in Zimbabwe,” she said.
“Insurance helps businesses in continuity planning by providing seamless, efficient insurance solutions that protect against financial losses and support smooth transitions during crises. For individuals, it is critical for protecting personal wealth.”
Tendai Mutseyekwa, marketing and public relations deputy director at National Social Security Authority (Nssa), said social security was a human right, which responds to the universal need for protection against certain life risks and social needs.
It provides income replacement to mitigate lifetime risks such as retirement, disability, death, or unexpected events, ensuring individuals receive financial support during difficult periods.
“Economically active citizens are entitled to social security, which serves to mitigate various life cycle risks they might face throughout their lives,” he said.
Nssa plays a pivotal role in providing social security protection to workers and their dependents.
Mutseyekwa said economic activities that people engage in daily were associated with various occupational hazards and risks. These may result in disability, temporary loss of income, invalidity, and or death of a breadwinner, hence a need to safeguard employees against such contingencies.
More than 60% of the global workforce, according to the International Labour Organisation (ILO), is in informal employment and most of them face serious decent work gaps, including a lack of social security.
Informal economy refers to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements.
According to the Zimbabwe National Statistics Agency, 88% of the employed population is engaged in the informal economy.
“Through our two schemes, the pension and other benefits scheme and the accident prevention and workers compensation scheme, Nssa currently covers approximately 33% of the labour force,” Mutseyekwa said.
“These trends are reflective of the growth of the informal economy which is currently excluded from social security schemes for one reason or the other. To address this problem, Nssa is working towards the establishment of a voluntary scheme to cover players in the informal economy.”
In a bid to help pensioners supplement their pay-outs after retirement, the pension fund in 2021 introduced loans for income generating projects.
The loans, according to Nssa, are short-term and attract an interest rate of 10% per year. The disbursement is done through banks.
About 8 000 pensioners had benefited from concessionary loans since 2021, according to Nssa chief investment officer Isaac Isaki.
Shepherd Sirewu Maphosa, a pensioner living in Harare, is one of the beneficiaries who accessed the concessionary loan in 2021. He used the money to start the project of keeping turkeys, road runners, and ducks to supplement his pay-out.
Economist Stevenson Dhlamini concurred that the insurance and pensions industry in Zimbabwe presents a significant opportunity for economic stabilisation and growth.
From a macroeconomic perspective, he said this sector can contribute to risk mitigation and capital formation, both crucial for sustainable development.
“The life and health insurance segment, if properly developed, could potentially reduce the burden on public healthcare systems and provide a safety net for households. This, in turn, might lead to increased consumer confidence and spending, positively impacting aggregate demand,” Dhlamini said.
“Property and casualty insurance for businesses could stimulate investment by reducing uncertainty. When companies feel secure about their assets, they’re more likely to expand operations, potentially leading to job creation and economic growth.
“The retirement planning aspect is particularly intriguing. In an economy like ours, a robust pension system could serve as a powerful tool for domestic savings mobilisation. This pool of long-term capital could be channelled into infrastructure projects or other productive investments, fostering economic development.”
Dhlamini said the risk management tools available in insurance, especially crop insurance, could play a crucial role in stabilising the agricultural sector, which is often a significant contributor to gross domestic product in developing economies.
“Financial inclusion efforts through insurance could have multiplier effects. By providing access to financial services in rural areas, we might see increased economic activity in previously underserved regions, potentially reducing urban-rural economic disparities,” the economist said.
“However, the success of these initiatives heavily depends on supportive regulatory frameworks and fiscal policies. Tax incentives for long-term savings, for instance, could boost the uptake of pension products.
“Moreover, financial literacy programs are essential to ensure that consumers can make informed decisions and fully utilise these financial tools.”
Dhlamini said a well-developed insurance and pensions sector has the potential to create a more stable economic environment, encourage savings and investment, and provide a social safety net.
However, realising these benefits will require coordinated efforts from both the public and private sectors, he submitted.
Insurance penetration in Zimbabwe is very low, with only 3% of the population covered by insurance as of 2023, and over 30% of motorists uninsured, according to official data.
This situation is exacerbated by low disposable incomes resulting from a combination of low wages and high inflation.
“Consequently, the majority of Zimbabweans lack medical insurance, which negatively impacts access to healthcare services, particularly for communicable diseases that require regular checkups,” United Kingdom-based economist Chenayi Mutambasere said.
“This increases the burden on state hospitals, which are already inadequately resourced to meet the demand.”
Morgan & Co senior analyst Tafara Mtutu said the industry’s potential was being undermined by a volatile economic environment characterised by high inflation and unstable currency regime.
“And all that has really affected the key players in the industry, which is the clients, the intermediaries, which are the insurers, and then the capital markets, which provide the instruments that are supposed to preserve value or actually improve or add onto the client’s deposits,” Mtutu said.
