The Insurance Institute of Zimbabwe (IIZ) says there is limited access to insurance products and services because service providers are mostly targetting the formal economy.
Despite efforts made by the Insurance and Pensions Commission (Ipec) to improve the insurance penetration rate in the country, IIZ reports that it remains at a paltry 3%.
The informal sector largely remains uninsured as most products and services are geared to the formal part of the economy it consists 60% of all economic activity in Zimbabwe.
IIZ, a professional insurance organisation and independent examining body whose core function is to promote efficiency and improvement in business practice of insurance, is pushing for the penetration rate to rise.
“Many Zimbabweans, especially those in informal spaces or low-income areas, have limited access to insurance products and services due to the concentrated presence of insurance providers to the formal economy,” said IIZ general manager Davison Choeni (pictured) said.
“There is a lack of trust in the industry due to past economic and financial challenges. There is a general lack of trust and confidence in the insurance industry among the public.
“This mistrust needs to be addressed through improved transparency, customer service, and dispute resolution mechanisms.”
He said there was a general lack of understanding and awareness about the importance and benefits of insurance among Zimbabwean, which presented a significant barrier to driving insurance uptake.
“Zimbabwe has faced prolonged economic challenges, including high inflation, currency fluctuations, and low economic growth,” Choeni added.
“This instability makes it difficult for insurance companies to price their products accurately, maintain profitability, and ensure the long-term viability of their operations.”
During the first quarter of 2024, short-term insurers reported consolidated insurance revenue amounting to ZW$812,96 billion (US$36,85 million).
The major drivers of the insurance revenue for the reporting period were motor, fire, hail, and personal accident classes of business contributing a total of 78%.
Of the foreign currency business, short term insurers generated US$53,18 million, of which, motor, fire, hail and personal accident contributed a combined 79% of the total insurance revenue.
“There is a need to improve financial literacy by investing in widespread financial education programmes to help people understand the importance and benefits of insurance especially with our small to medium entrepreneurs,” Choeni said.
“These people need to be taught how insurance works, the different types of insurance products available and how to choose the right coverage as well as dealing with reputable and registered service providers.”
He added: “This can be done by enhancing product accessibility, making insurance products more accessible to the general population as well as developing low-cost, basic, insurance packages that cater to the needs of the lower-income segments.”
Choeni said the insurance sector needed to leverage digital and mobile platforms to distribute insurance products, reducing the reliance on traditional brick-and-mortar channels “as well as partnering with microfinance institutions, cooperatives, and community-based organisations to reach underserved areas.”
To improve the insurance uptake, he said there was a need to implement incentive schemes, leverage partnerships and collaborations, innovative product design, and promote targeted marketing and awareness campaigns.
“Review and strengthen the regulatory environment for the insurance industry to ensure consumer protection, fair pricing, and industry stability,” Choeni added.
“This could include enhancing solvency requirements for insurance companies, improving claims settlement processes and dispute resolution mechanisms, and implementing mandatory insurance coverage for certain sectors or risk areas.”
During the first quarter, Ipec issued four major regulatory circulars to help improve the insurance sector.
These were the 2023 Annual Reporting guidance, instructions on the Settlement of Claims, and Actuarial Society of Zimbabwe Guidance N ote for Compensation for Loss of Pre-2009 Value of Pension Benefits (SI 162 Of 2023).
Ipec also issued a circular on the Sectoral Risk Assessment to Inform Zimbabwe’s Third Money Laundering National Risk Assessment.
“The institute is rolling out relevant and practical short courses which we continue to urge our practitioners to take advantage of and close the mismatch,” Choeni said.
“IIZ is working to strengthen industry partnerships through fostering closer collaborations with insurance companies, brokers, and other industry stakeholders to ensure the curriculum aligns with evolving industry needs and provides more practical, hands-on learning opportunities for students.”
He said the institute was also working to increase the availability and quality of internship and apprenticeship programmes within the insurance industry.