THE Insurance and Pensions Commission (Ipec) has reported a 27% surge in complaints against the sector for the nine months ending September 30, 2024, highlighting the need for operational reforms.
According to Ipec’s latest figures, the regulator received 103 complaints during the period, comprising 95 against short-term insurers, seven against brokers and one against multiple agents.
This represents a significant increase from the 81 complaints lodged during the same period in 2023.
“Unsatisfactory service was the major source of complaints, constituting 47% of the complaints,” Ipec said in its 2024 third quarter short-term insurance report released earlier this month.
The insurance industry needs to relook, reform, and re-strategise their operations.
This is because the economy is facing a plethora of challenges, including exchange rate volatility, income erosion, rising costs of doing business, tight liquidity, policy inconsistency and declining disposable incomes.
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Most have been pushed into corporate rescue while others are scaling down and winding up operations.
Already, the third quarter report revealed that seven short-term insurers and two short-term reinsurers were penalised for late and non-submission of 2023 actuarial valuation reports, an analysis of the assets and liabilities of a pension plan.
Such reports show the financial health of the company and the lack thereof questions these insurers’ health.
Insurance Council of Zimbabwe research analyst Kundai Jonga highlighted some of the challenges facing insurance players, such as the increased frequency of climate-related events.
“Developing mechanisms, models, and solutions to mitigate shocks from climate-induced risks remains a tangible challenge. Insurers need to develop innovative products to address these risks while maintaining affordability and profitability,” Jonga said.
“Many insurers rely heavily on traditional products but are transitioning to embrace micro-insurance or parametric insurance solutions tailored to low-income households and small businesses, particularly those in rural or climate-vulnerable areas, as part of inclusivity.”
The analyst further stated that a significant portion of the population remained unaware of the critical role that property and agricultural insurance played in financial protection and risk management.
“This lack of awareness leads to low insurance uptake, particularly in rural and underserved areas. The current intense engagements with stakeholders on the ground are aimed to educate, create awareness on this, and target previously excluded and underserved communities,” he said.
“The industry’s reputation has suffered due to misconceptions, particularly the conflation of pensions with short-term insurance. The massive loss of value experienced by pensions during the transition between the bond note and US dollar in 2018/2019 created distrust among the public, impacting the broader financial services sector, including short-term insurance.”
Zimbabwe’s informal sector accounts for most economic activities, presenting another challenge for insurers.
“It largely remains disorganised, and this would render traditional insurance models unable to address the needs and dynamics of this sector, making it challenging to create and implement tools that effectively penetrate this market,” Jonga added. “Formalising this sector would be a game changer.”
Formalising this sector would bring its estimated annual turnover of US$14,2 billion, for an US$8,6 billion gross domestic product valuation into the economy.
The problem is that many individuals and businesses have prioritised immediate financial needs over purchasing insurance, which threatens to reduce policy sales.
This is because economic hardships make it difficult for consumers to see insurance as a necessity, according to the Insurance Institute of Zimbabwe general manager, David Choeni.
“Economic challenges such as natural disasters or agricultural losses have resulted in a higher volume of claims. Insurers are pressured to pay out claims promptly, which can strain their financial resources,” Choeni said.
“Insurers face increased costs associated with maintaining operations, including salaries, office space, and administrative expenses.
“Inflation and currency volatility contribute to these rising operational costs, leading to higher premiums for consumers.”
Choeni said the instability of the Zimbabwe Gold currency (ZiG) complicated transactions and claim settlements, particularly for policies that required foreign currency.
“This affects insurers’ ability to fulfil obligations to policyholders with international coverage,” he said.
“The economic environment has heightened risks for insurers, particularly in property and agricultural insurance. As businesses fail or properties are abandoned, insurers face increased claims from damaged or uninsured properties.”
According to the institute, insurers often rely on investment returns to support their operations, but economic instability has led to poor performance of local investments, impacting profitability.
“Frequent changes in regulations due to the economic climate create uncertainty for insurers, complicating compliance and operational efficiency,” Choeni said.
He also blamed brain drain.
Choeni said economic desperation could lead to more instances of insurance fraud, as individuals sought to exploit the system.
“Insurers have had to invest in fraud detection measures to counteract this trend,” he added.
Ultimately, insurers need to invest more in educating consumers about the importance of insurance as a necessity.
“These factors collectively illustrate how economic instability has created a challenging environment for the insurance profession in Zimbabwe, affecting both the insurers and the insured,” he said.
With a plethora of challenges facing insurers, both the council and institute have set aggressive campaigns for 2025 to improve the industry’s fortunes.
For the council, this includes expanding the Farmers Basket Insurance Product, an innovation that targets vulnerable small-scale farmers.
The institute is looking at expanding and diversifying training programmes to include emerging trends, technologies, and best practices.
This will be done by developing curricula that incorporates insurtech, data analytics, and climate risk management.