Economic crisis reduces insurance penetration

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THE current economic woes bedevilling the country continue to weigh down on insurance penetration, with players in the market crowding out the brokers, businessdigest has learnt.

Melody Chikono

Insurance brokers are resultantly cushioning themselves against risk by participating in low-risk areas.
Although penetration ratios are low, the chairperson of the Insurance Brokers Association of Zimbabwe (IBAZ) marketing committee, Mapiye Chigorondondo said this week there is not enough big risk and business in the country.
This has seen brokers participating in small, personal insurance and micro-insurance products instead of big-risk projects.

Chigorondondo said the sector was battling with a number of challenges stemming from the tough economic environment.

“Naturally, when consumers and businesses are under stress, insurance is not top of the mind for many. It has become increasingly difficult to maintain adequacy of (sums insured) insured values, hence consumers begin to question the value of insurance where prices are going up regularly, and they find themselves under-insured. The affordability of insurance where one has to constantly review their sums insured upwards and pay additional premiums also becomes a question,” he said.

Chigorondondo said insurance brokers face challenges when collecting premiums from clients due to cashflow challenges.

“With most businesses facing cashflow constraints, collection of premiums is not easy. The size of the market has not been growing, therefore it also results in constrained growth as some of the products that are readily available in growing economies are difficult to implement and sell in this country. As an industry, this means we end up lagging in experience and exposure compared to practitioners that are practising in economies that are growing. The market is also crowding in the intermediary level,” he said.

Chigorondondo said while a lot of development and improvement has taken place, availability of insurance products is still not as readily available, adding that insurance requires a lot of education.

“Most people are familiar with funeral insurance, but beyond that many are not well exposed to the benefits of insurance in other areas of life. The perception with many is also that insurance is very expensive and for the rich. The other reason is distribution channels. Insurance also thrives where there are high levels of formal employment. With high levels of informal employment, it makes penetration of insurance much more difficult. Disposable income is limited as well and therefore not many people worry about insurance.

“We are going to continue with our public insurance awareness campaigns which we have already started, for example IBAZ road shows, advertisements, bulletins, presentation to various business member organisations, amongst others,” he said.

Chigorondondo said the situation also presents opportunities and solutions for clients who want to take up insurance in other currencies and can afford it since Zimbabwe is a multi-currency market.

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