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Insurance sector: ‘Change of mindset a must to stay afloat’

THE Insurance Institute of Zimbabwe (IIZ) this week held its winter school in Nyanga under the theme “Driving Growth Disrupting the Mindset Completely” with the aim of developing leaders in the insurance sector in the face of a myriad of challenges facing the industry. Zimbabwe Independent business reporter Melody Chikono (ZI) caught up with the IIZ’s first vice-president Mapiye Chigorondondo (MC, pictured) to understand the role of the IIZ in the insurance sector and the economy as a whole. Below are the excerpts:


ZI: What is your overview of the insurance industry at large?

MC: We have not been spared as the insurance industry by the economic situation in the country, but we have managed to keep insurance companies afloat. If you look at the performance of companies countrywide, you will notice that most companies that did well were insurance companies.

The recent Insurance and Pensions Commission (Ipec) report shows that insurance companies did well, even the insurance brokers. It is neither here nor there, but we did quite well. But we believe things could be better, given a scenario where the economy was performing.

ZI: What is the aim of this conference and what have been have been your achievements over the years?

MC: Basically, on this conference we aim to change the mindset of insurers to see other opportunities that are available like I indicated before. We have realised that for anyone to become great it has to be the mindset that has to change first and the sector is not an exception.

As the institute, we have been working on ensuring personal development, which is a key component. We now have examinations that are written in Botswana, Mozambique and so on.
We have also been accredited with the Ministry of Higher and Tertiary Education and we are now regionally recognised.

In the long-term we are hoping to establish a college of insurance which will cement our efforts. Initially, it was supposed to be built last year, but it has been delayed. The project will definitely take off next year.

Overally, we are looking at professional development of the insurance industry practitioners, ensuring that the insurance industry is manned by qualified personnel.

ZI: What challenges has the institute faced?

MC: I won’t lie. We have been doing very well. I understand things are tough out there but for us we have hinged on innovativeness.

Like I said, we have got a number of courses which we are now offering at regional level. We also have various initiatives that have sailed us through but what I can say is that we haven’t done well on the side of selling our courses, especially in schools as what the banks do.

If I were to ask someone what they want to do after school, they will name other professions but rarely will someone name insurance as a profession. It points to a lack of adequate marketing of the product on our part. So basically we are aiming at ensuring that our courses are known from earlier ages. This will help them master the art of insurance later in life.

We have also experienced challenges in the sense that there is need for continuity in resourcing manpower and finances. It is a bit challenging on that front.

ZI: What challenges has the industry faced?

MC: The insurance industry challenges go a long way back. They include the economic challenges which I just referred to. They include cash shortages, company closures, the general slowdown of the economy.

When industry is not performing, it will also have an impact on the insurance industry, hence the general situation has had an adverse effect on the sector.

Insurance premiums suffered as people failed to pay. We have also seen claims increase sharply. This has been necessitated by people trying to find a means of living which, in turn, has led to an increase in insurance fraud whereby they make up cases in order to get money from insurers. There has also been an increase in motor vehicle claims. There is also inflation which has affected the whole industry, the insurance sector included.

Basically, all the issues to do with the economy have, in one way or the other, affected the insurance industry as the sector feeds on existing businesses.

Scarcity of foreign currency has also seen the sector facing challenges when it comes to vehicle claims which have been on the increase. Insurers would need to secure spare parts or new vehicles altogether as replacement, which needs foreign currency.

There has thus has been an increase in the overall costs of claims.

ZI: Please expound on insurance fraud.

MC: Statistics the world over show that of all insurance claims, at least 33% of the claims are fraudulent. This also applies to Zimbabwe. Fraud comes in different forms. It might be a claim on a vehicle that is not there or someone inflating claims.

As an example, when a radio gets stolen one can say it’s a television set, hides the TV at a friend’s and when inspectors come they won’t find a TV it will only come back when they have left.

So in essence you will notice that there is a relationship between a non-performing economy and the level of insurance fraud. In short, the currency economic situation is helping in fueling fraudulent insurance claims.

On legislation, I can say it’s watertight on insurance fraud. Apparently, insurers have created a platform where these issues are discussed and a way forward is mapped. I believe that insurers should be more vigilant to tame this problem.

Motor vehicle companies should employ risk managers, risk assessors and investigators to verify claims. Unfortunately, a system is only as good as its own people. No matter how good a system is if the people are not good, it will not work.

ZI: We have heard of several instances of corruption in pension funds. How prevalent are these issues in insurance companies?

MC: On the pension side, I won’t say much, but generally, I would want to say there has been a misunderstanding between service providers and policyholders concerning their policy terms.

I will start with the life side. It has to be understood that insurance is a long-term policy which takes up to 20 or 30 years

A lot of issues can happen during this time. Sometimes one might find out that what they have contributed their whole life has been wiped out as in 2008 and thus end up saying they have been duped and so on. It has to be understood that it is not the intention of the insurer. For example, I don’t think an organisation like Old Mutual would take on board a client just to dupe him or her at the end of the day.

On short-term insurance, naturally it is for 12 months .You will realise that not much would have happened or changed in this period

In short, as I indicated, there is a misunderstanding between the insurers and policyholders with the latter being misinformed on what to expect on their policies. No one is telling them exactly what is it that they get upon taking up the policy and how it works. At the end of the day they think they have been duped. On this one we take the blame.

There is need to fully educate policyholders on their schemes and come up with strategies to rectify the misunderstanding as a response to the public.

But in cases where these cases are genuine, it will result in organisations being excommunicated by the regulator, Ipec. In the past five years, five companies have been excommunicated on issues of corporate governance especially on misuse of public funds. I will not mention names.

ZI: You have spoken about personal accident cover, saying a number of these policies go unclaimed due to miscommunication between spouses. Can you explain?

MC: By personal accident I don’t mean motor vehicle accident. You might miss a step and fall, that becomes an accident and usually it’s on 24-hour notice. The cover also has death benefit, mostly over three years. It also comes with permanent disablement which will then be calculated as 10% of death benefit and you get paid.

If you are hospitalised, the company will not fire you, but will get a replacement and you will be getting paid. It also covers your medical aid shortfall.

It is a policy arranged by the employer. But now what normally happens is that people do not discuss their benefits with their spouses at home. How then will one know how to claim these on your behalf if you they do not know? We have noticed that most of these go unclaimed by merely a fact of ignorance by the spouse and if the employer is not honest it will just end like that.

We have had several cases where people haven’t been paid because they don’t know of such a cover and how far it goes to protect them at work and after.

ZI: What can you say about the underwriting capacity of the insurance industry?

MC: Personally, I haven’t been in underwriting for the past four to five years, but I think the industry has the capacity.

As you know, the capacity is determined by a company’s balance sheet. It could be better, but considering that Ipec licences them, it shows they are capable and have the capacity.

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