adminTinashe Makichi Harare Bureau
Zimbabwe’s insurance penetration rate is expected to increase from 5 percent to 20 percent in the next three years due to the entry of small to medium scale insurance companies into the sector. According to the Insurance and Pensions Commission (IPEC), the insurance industry has already started registering positive results since the introduction of micro insurance companies into the sector.
IPEC acting commissioner Pupurai Togarepi said the insurance industry is set for a boom in the next three years.
“Even with the current economic challenges, the insurance sector is doing well, as evidenced by the premium growth in some of the insurance firms, the number of new entrants in the market, new products and distribution channel growth over the past few years,” said Togarepi.
“We are going for what we call financial inclusion; the lower end of our society will now have access to insurance under micro insurance.”
Main beneficiaries will include the majority of people in rural areas and the informal sector who do not have any access to insurance services.
Capitalisation requirements for insurers range between $1,5 million and $3 million.
Togarepi said the continued increase in the penetration level was an indication of the potential in the market.
He urged insurers to find requisite strategies to continue penetrating the market. The activities of the small to medium scale insurance companies are set to be strengthened further if the Micro Insurance Bill is passed into law. The bill will, among other things, govern how the small to medium scale insurance companies will operate.
Insurance penetration ratio in Zimbabwe has remained relatively low with premium written at 4 percent of Gross Domestic Product as at December 31.
Insurance business continues to be depressed as the manufacturing sector’s capacity utilisation remains stagnant at 39,6 percent.
Furthermore, a number of insurance companies are currently affected by changing public perception about insurance and policies offered.
Most policy holders lost their contributions to the insurance companies due to hyperinflation and the introduction of the multi-currency regime.
IPEC is in the process of consulting on the amendments of the Insurance Act across the spectrum, including life assurers, short-term insurers, funeral assurers and brokers.
Togarepi said the liquidity crunch in the market had slowed down business in the sector with the exception of vehicle insurance and funeral assurance.
The life assurance sector has been one of the most affected by liquidity owing to low confidence in the market after life assurance policies were wiped out during the hyper-inflation era.
Meanwhile IPEC is working with the Zimbabwe Republic Police to weed out insurance fraud and to rid the sector of bogus insurance agents.
derick.khumalo