IPEC in micro insurance drive

HARARE - The Insurance and Pensions Commission (Ipec) says it will this year intensify its drive for micro-insurance to boost Zimbabwe’s insurance penetration, which it says is low.

Micro-insurance products offer coverage to low-income households or individuals who have little savings. It is tailored specifically for lower valued assets and compensation for illness, injury or death.

“The drive for micro-insurance is one of the efforts being extended by Ipec towards financial inclusion in line with the National Financial Inclusion Strategy 2016-2020,” Christopher Manunure, Ipec’s principal analyst said while making a presentation at the Zimbabwe Financial Inclusion Forum in Harare last week.

“We are targeting the provision of products and services that cater for the under-served and marginalised segments of our society. In this regard, we will also be focusing on the registration of dedicated micro-insurance firms and expanding reach through digital delivery channels,” he said.

Manunure indicated that the commission would this year “streamline the current supervisory framework for micro-insurance companies in line with the proportionality principle, which calls for the use of simpler and less burdensome guidelines for low risk activities.”

“We found that a review of the existing regulatory framework and tools is necessary in order to facilitate financial inclusion,” he said.

This comes as government last year gazetted Statutory Instruments 39 and 40 to govern and monitor the operations of micro-insurers. 

Minimum capital levels for micro-insurers were set at 

$300 000 compared to $2,5 million and $5 million required for traditional nonlife and life insurance companies. Ipec said it was also looking to build on this by pushing for “insurance coverage through wider branch networks and banc-assurance.”

The insurance regulator noted that the country’s insurance penetration, at 4,7 percent in 2017, is very low compared to other territories.

The commission has not yet finished tallying figures for 2018 but it believes that the southern African nation’s insurance penetration came down even lower to 2,9 percent in 2018 after it rebased some of its economic statistics, in an unexpected move that increased the nominal size of the struggling economy by more than 40 percent to $22 billion for 2017.

Ipec makes insurance penetration calculations by measuring the ratio of total gross premiums to the gross domestic product. The regulatory body says the metric is an “indicator of the importance of the insurance sector in a country.”

Manunure said apart from low disposable incomes, low confidence in the insurance industry has been the major deterrent of insurance penetration in the country.

“In 2008, we saw insurance and pension values being eroded to the extent that many Zimbabweans have lost confidence in insurance,” he said. 

Ipec, which is targeting an insurance penetration of 20 percent by 2020, says Zimbabwe’s insurance penetration rate had increased steadily from about 1,9 percent in 2010 to 4,7 percent 2017. 

“Micro-insurance has played a big role in the progress that we have made thus far,” Manunure said.

He said there were more than 1,5 million policies under micro-insurance products as at December 31, 2018. “The commission is also assessing six micro-insurance license applications which were received in 2019,” Manunure said.

Meanwhile, Ipec says it is working on a “micro-pensions” framework to cater for the informally employed and those with irregular incomes to increase pension coverage in the country.

Manunure said this is in line with successful models that have been implemented elsewhere within the region.

“The current three pillars of pension provision cater for t he formally employed only. Ipec is also amending the legislation to make pension provision mandatory to all employers,” he said.