'Bond notes stifling insurance sector'

HARARE - The Insurance and Pensions Commission is targeting insurance penetration to reach seven percent by 2022 compared to the current 4,7 percent on the back of an anticipated economic growth.

Zimbabwe remains in top five in the region in terms of insurance penetration. Paul Nyakazeya interviewed Glenrand MIB Zimbabwe chief executive officer Takura Dzimwasha about the insurance industry in Zimbabwe.

Glenrand is a registered short-term insurance broking company in Zimbabwe.

Q: What is reinsurance? Do to think people understand what it is and how it works?
A: You may recall that the basic definition of insurance points to a “risk transfer mechanism”.
The buyer of insurance products (insured) transfers the risk of loss/ accident onto the shoulders of an insurance company.
The insurance company can only take so much of the risk and also transfers the balance to another company, the reinsurer.
Reinsurance is basically insurance bought by the insurer.
People only need to be sure that whoever the insurer they are dealing with is adequately reinsured especially in the event of major losses.

Q: The average life assurance/pension fund investor feels robbed/done out of their savings. What role has your sector played in this erosion of value and loss of savings?
A: We operate in the short-term insurance space, where products span to a maximum of 12 months.
We understand that 12 months is too long a horizon for planning purposes and as such our team advises all our clients to review the insured values every quarter to ensure that they remain adequately covered.

Q: How has been trust levels among your clients and in general and do you see your business and the sector recovering?
A: Over the years, we have had a very good business retention record. We are confident that our clients trust the level of our expertise as we advise them.
All our staff members are also doing various initiatives towards refining and sharpening their skills so that they can serve our clients better.
The reason why we continue to grow is that our clients see value in our services and are not ashamed to refer their peers to do business with us.
The sector we are in relies heavily on the fortunes of industry and is bound to recover as the whole economy recovers.

Q. What strategies do you have in place to improve the situation?
A: We are always looking out to improve our service offering, both in terms of scope of cover as well as pricing.
We realise that insurance does not fall on the priority list of critical expenditure for many people.
Our role is to advise them on the levels of their exposures and demonstrate how key insurance is towards mitigating the potential losses.
Whenever there is appreciation of danger appetite for insurance products always increases, holding other things constant.

Q: Since the introduction of bond notes in 2016 and re-emergence of the black market, what has been the impact on the insurance and re-insurance sector. What challenges, if any, are you facing?
A: The re-emergence of the black market has resulted in a three-tier pricing system for the RTGS, bond and US dollar transactions.
The cost of imported goods such as motor vehicle spares, household goods, plant and machinery components and building materials is either pegged in US dollar terms or inflated at the ruling alternative market rates which are not 1:1 with the US dollar.
Realistically, the parallel market rates have left most insureds underinsured as the insured values are below their market values.
Revising the values upwards is, however, a huge expenditure on the part of the insureds since income levels are not rising in line with the changes in the foreign exchange markets.
As an example, panel beaters cannot access foreign currency in the formal market because they are low on the Reserve Bank of Zimbabwe priority list.
For them to remain in business they go to the alternative forex market and have to scale up their prices by levying the forex premiums to the insured.
Ultimately the insurance companies have a much higher repair bill to meet and the insureds also pay more in terms of their contributions in each and every loss (excess).

Q: The perception out there is that underwriters are quick to receive money from their clients but very slow to react when it comes to meeting their end of the bargain in times of need. The question is: what is the incentive of insuring if one is not able to enjoy the benefits of the insurance?
A: This is a problem of lack of awareness. Particularly for motor insurance, the problem arises when cheap insurance is bought from unscrupulous/ bogus people.
We advise all our clients to arrange their insurances through a reputable insurance broker, where Glenrand is rated highly.
The broker knows the insurance market and should be able to properly advise the insureds on the best companies to deal with.
We are aware that there are companies that prefer not to settle their obligations. Others, however, go out of their way to ensure that they find an excuse to settle claims.
We take time to analyse the security levels of all insurance companies as well as their capacity and service quality before we recommend them to our clients. 

Q: Clients are now more critical when it comes to deciding whom to deal with. Do underwriters have the capacity to pay at this moment. Furthermore, do they have good balance sheet sizes to support good reinsurance programmes?
A:There are a few very solid underwriters in the market, who have grown their balance sheets in recent years and are very capable of settling claims whenever they arise.
In the midst of the challenges bedevilling the economy some of them have been bullish in terms of their market share and have either maintained or improved on their GCR rating for claims paying ability.
These are the insurers we recommend to our clients.

Q: Insurance companies have tended to rely on investment income with very little being recorded from underwriting income, is this likely to change this time around from what the industry has experienced during since the beginning of the year?
A: Quite a few companies this year have decided to clean up and rebalance their books.
Premiums rates for some products have been scaled up while terms and conditions on others tightened up all in an effort to boost underwriting income.
From the beginning of the year very little has been earned from investments because money market rates are depressed, the stock market has been bearish while the property market faces challenges with high voids.
These factors are worsened by disturbances that are normally characteristic of an election year. Profitability of insurers will this year hinge upon a good underwriting result.

Q: How is the issue of capitalisation being handled, are industry players capitalised and will all companies be able to capitalise by year end?
A: The Insurance Commissioner, through Ipec, has come up with absolute capitalisation minimums which a few companies are struggling to meet. Companies have been given more than enough time to meet the minimum requirements and those that demonstrate non-compliance will at some point be forced to close shop.
We believe that it is in the best interests of the insuring public to have solid underwriters. We urge Ipec to be more vigorous in monitoring compliance in this regard.

Q: What has been the industry’s major highlights since the beginning of the year?
A: The industry continues to push for micro-insurance products for consumption by individuals, SMEs and the general informal market. This will help scale up insurance penetration ratios.

Q: What do you think government and the regulator need to do ensure that the reinsurance industry grows?
A: We urge the government, through Ipec, to be more vigorous in flashing out bogus insurance companies and those that are short-changing the insuring public by not paying claims.
Furthermore, Ipec should come in to regulate and bring sanity on rampant price competition and undercutting which is to the detriment of the insuring public in the long run.

Q: Who is Glenrand and what can the market expect from then during the second half of the year?
A: Glenrand MIB is a registered short-term insurance broking company, offering a wide range of services to local and international clients.
We are market leaders in corporate and commercial broking and a major participant in personal insurance.
We offer tailor-made solutions to mining, agricultural, manufacturing, construction and finance operations.
Our services also extend to specialised risk management through our lasting commitment to personal service of the highest calibre.

Q: Do you have any specific issues or developments you want the market to know about Glenrand?
A: Glenrand has very strong roots in Agricultural insurance following the acquisition of Farming & Industrial Insurance Brokers by UDC and Glenrand MIB to form UDC Glenrand in the late 90’s.
Over the last two years the company has been retracing its footsteps and has been re-establishing products tailor-made to provide solutions to the agriculture sector.
The farming book has been growing exponentially and focus on this area will continue in the short to medium term. This also coincides with the thrust by the new political administration which is employing “Command Agriculture” to boost Gross Domestic Product.  

— Financial Gazette

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