Sometimes it pays to voice your displeasure with something. In Zimbabwe, that is rarely the case and so when we see it happen, we just have to take a minute to celebrate. So, this is what having a voice feels like huh?
Insurance is one of the bedrocks of a functioning economy. We need insurance just as much as we need banking (especially credit). That is the case in Zimbabwe but those two industries – banking and insurance – to put it lightly, have a chequered past and are not viewed in the most positive of lights by the masses.
Zimbabwe’s currency problems led to insurance companies failing to honour their end of the bargain. After years of contributing real money, many insurance clients ended up getting peanuts as settlements. Insurance companies may have had an excuse but that didn’t make the sting any easier to bear.
Where insurance companies do not have an excuse is in the following areas that even the Insurance and Pensions Commission (IPEC) noted –
- the design and sale of products (e.g. funeral policies that don’t mature)
- unjustified delays in settling valid claims
- high penalties for policy terminations
- misleading marketing
IPEC heard the people’s complaints and engaged the insurers to resolve those issues. The first tangible result from that engagement are changes that are coming to funeral assurance policies. Apparently, funeral assurance accounts for 80% of all insurance policies in the country and so that was the best place to start.
Funeral policy changes
IPEC’s new regulations say when a funeral policy subscriber pays US$6000 or its equivalent in ZW$ in premiums, that policy will be deemed fully paid-up.
The subscriber will not need to keep paying premiums monthly. At that point they would only wait to collect their payout in the event of a covered member dying.
Before this change, a subscriber had to keep paying perpetually, until a death triggered a payout.
This unfortunately means that most insurance pay-outs won’t exceed that US$6000 either. That is despite the fact that the insurance companies would have had years with those insurance premiums, investing them as they see fit. It is what it is, I guess.
In terms of grace periods should a member default on premium payments, IPEC says the Insurance Act still applies.
- For policies in duration of force of over 5 years but less than 7 years, a grace period of 6 months shall apply.
- For policies in duration of force of over 7 years but less than 9 years, a grace period of 9 months shall apply.
- For policies in duration of force of over 25 years, a grace period of 25 years shall apply
The Act seems to imply that for policies that have not been paid up for 5 years or more, the insurance company has to send out a notice that the policy will be terminated if payment is not received within 14 days of receiving that notice.
So, insurance companies can no longer terminate policies the moment one defaults on payments like some were doing.
The social media pressure
We often complain about the scourge that social media has become on society. That’s still mostly the case but every so often we use social media for good. I believe the conversation that really put the pressure on IPEC to act originated on social media.
Some lady complained to a listening audience about the design of funeral insurance products in Zimbabwe. We had to comment on the story too.
The lady made some overgeneralisations, left out some parts that worked against the narrative etc but her points were well taken. Even insurance companies had to respond and so did IPEC.
This is the result of that. So, dear reader, please tweet away, craft that Facebook post as if your life depended on it. Who knows, you just might help make sweeping changes to some stubborn industry.
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7 comments
It’s a great development though I’m sure that the funeral assurance companies, have their legal teams on it, as this will refund their revenue.
Yeah, seeing as 80% of all insurance policies are funeral policy plans, it most definitely represents a decent chunk of insurance company revenues. They won’t go down without a fight, they will try to find a way.
IPEC initially said they were going to conduct consultations with companies, and if the new regulations are the product of the consultations, I wonder what was IPEC’s starting offer. Imagine what size of a dent the new regulations will have on the profitability and viability of the companies. The companies won’t be very willing to accept these regulations. I think these regulation are going to end up with a huge messy fight and huge climb-down by IPEC. If IPEC doesn’t pause the regulation there will be lawsuits that’s how I think this will play out
You got me wondering though. Is it a good assumption to make that insurance companies will lose out with this move. I know one of Nyaradzo’s cheapest plans costs $6.99 in premiums per month and pays out $1000. On that plan, it would take 71 years for someone to contribute $6000. Even one paying $20 premiums will need 25 years to pay it up to $6000.
I don’t have the data, but I don’t imagine there are too many people close to paying up their policies.
Then, just as you are 1 year shy on paying up your policy, new monetary policy resets to you to the beginning.
That paid up limit is useless. The vast majority of people can never come close to paying that much in their lifetimes seeing as premiums start as low as $1. Someone paying a$5 premium Per month will need 100 years to become paid up! (BTW a $5 has benefit of up to $5000)
Paida a muilti tier system, such that those with lower packages get a lower threshold, coz stil many wil get into retirement b4 u ar fully paid