OLD Mutual Life Assurance Company is reviewing its product portfolio in a move designed to help policyholders hedge against hyperinflation. Zimbabwe’s inflation figure conti
nues to skyrocket, moving from less than 100% in January to 455,6% for September.
Old Mutual said because of the spiraling inflation rate, policy values were no longer the same.
“Policies cannot cope with the hyperinflationary environment,” a senior official said. “We have had to repackage our total offer for customers in order to enable them to get the best of our products.”
The spokesman said the basic philosophy of his company was that the products and services that were offered to the market must deliver value to the client.
“The products must satisfy the expectations the client had at the time of buying the product,” he said. “Any product that does not meet this criterion should not be on the market.”
He said the company had reviewed its product portfolio under the current hyperinflationary environment and certain classes and size of policies no longer delivered value to clients.
“These products were designed for a stable environment in that environment economic indicators such as inflation, interest rates and investment returns were also relatively stable,” the spokesman said. “Over the last few years we have seen a serious erosion of value in these policies because of the effects of high inflation and negative investment returns.”
He said the premiums on some of the policies had become so totally dominated by expenses that the cost of collecting the premiums was more than the premiums themselves.
“On the other hand, the benefits derived from such policies will be far below the clients expectation at the time of purchase,” he said. “Our principle of delivering value to the client is, therefore, not being met by these products.”
The spokesman said the company had been working hard to control the growth of expenses, with various initiatives being taken, including retrenchments.
“These efforts have seen Old Mutual being consistently ranked as the lowest cost provider of insurance products in Zimbabwe for the past few years according to market surveys,” said managing director, Luke Ngwerume.
He said the company had developed a new generation of products for the country’s economy where both life cover and premiums would grow in line with changes in inflation rates.
“This will ensure that benefits will remain relevant at claim stage, and also that premiums keep their real value,” Ngwerume said.