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Currency volatility sticky issue for insurance sector

Melody Chikono

MAPIYE Chigorondondo was recently elected Insurance Institute of Zimbabwe (IIZ) president at the organisation’s annual congress in Victoria Falls. His election comes at a time the insurance sector is battling the turbulence caused by high inflation as the Zimbabwean dollar rapidly loses value to the United States dollar. Zimbabwe Independent reporter Melody Chikono (MCh) this week caught up with Chigorondondo (MC) to discuss his objectives, the challenges the industry faces and the outlook of the IIZ. Below are excerpts of the interview:

MCh: Coming in as the recently elected president of the IIZ, what are your objectives?

MC: My goal as the incoming president is to see the IIZ moving forward. This is a learning institution, our qualifications must be recognised and sought locally regionally and internationally. This is one I’m going to be working on, the other one is I want to see insurance penetration in terms of insurance being taken as a career.

People coming out of school must be able to say I want to do insurance as a career; most people who come to the insurance industry come so mostly by accident, if you look at most people in the insurance industry they were once teachers, policemen and they say there is some extra money I can make from insurance.

As an institute we would like to ensure that there is an awareness, that is to say people come and say they want to take insurance as a career, then also insurance that i’s where I started and that’s where I’m going to retire and if you look at it government must also recognise that the insurance industry is a major player in the economy because insurance has a way of putting financial resources together.

Right now the government has recognised that insurance is important, that is why now they have increased the prescribed assets from the 5% to the 10% to assist the government. In terms of investment, insurance is one of the ways to put together resources and get money into the economy, you find that even in terms of assets, insurance industry has a lot of assets in terms of buildings.

I feel that insurance at the moment we are not marketing it properly and it’s not very visible, people take it for granted. Even the banks, 70%-75% of those banks are from the insurance companies.

MCh: There have been issues around the compliance of prescribed assets across the industry mainly from the funeral sector they are really struggling in terms of compliance. What is your take on that?

MC: If government says it should be done, then it should be done. I think it’s for the good of the country.

MCh: Even if people are struggling to meet demand?

MC: I think for people to come up with policies they would have realised that there is something that has to be done, so I think they should just comply.

MCh: From last year, the issues affecting the insurance industry are still posing headaches, nothing has been done about them. There have been more legislative issues, making the situation more complicated for the sector. What are the major challenges in the sector?

MC: I am mainly concerned about the educational part of the IIZ, not the policies, but at the same moment I cannot divorce myself from that.

Some of the biggest challenges we have is Statutory Instrument 142 because with insurance we are selling a promise, that is to say if something happens we will be able to compensate you, but unfortunately, with the coming in of this instrument and also the exchange rate which is unstable we are finding it difficult to indemnify if something happens to the client.

To indemnify is to pay the client and put them in a position they were before loss, this is now proving to be difficult because the rate is continuously going up.

Someone insures a vehicle today for ZW$6 000, ZW$10 000 or ZW$20 000, six months down the line the same vehicle is now costing ZW$50 000 or ZW$70 000 and when there is a claim, you pay the ZW$20 000 instead of the ZW$60 000 and the client will not be able to replace the vehicle.

So we are appealing to the powers that be that they allow us to write insurance in US dollars so that we foresee value because insurance is a very important industry in the economy.

The biggest problem is confidence, this happened in 2008 when we had hyperinflation, now we have the Zimbabwe dollar and people are saying we are going back to 2008. With short-term insurance, people are still taking policies. I’m not sure about the life (assurance) side because those are long-term insurance. So it is a big challenge.

MCh: How have these currency issues affected enrolment at the institution?

MC: We were using United States dollars up until Statutory Instrument 142 and now people are paying in local currency; we have not been affected that much, but we want to develop the current curriculum which we will link with the Insurance Institute of South Africa and the Chartered Insurance Institute of the UK and those are paid in forex. So now people are not paying in US dollars, we now have a challenge in terms of having the forex to pay for those curriculum developments.

MCh: How do you foresee the IIZ in the next four years?

MC: My term is one year that can be extended to two, I would like to see the institute being the sole provider of professional qualifications in Zimbabwe because at the moment we have qualifications being provided by other associations, but insurance-related like the pensions fund they got their own qualification. But I will ensure that in my tenure at the IIZ will provide all educational needs to professionals in the industry.

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