Life insurers embrace compensation models

Factors such as high inflation and economic instability have posed significant challenges for insurance companies in this market.
The Life Offices Association of Zimbabwe (LOAZ) says implementing optimised compensation models in the country could significantly drive performance and growth in the country’s insurance sector.

LOAZ is the representative body of all life insurance companies in Zimbabwe.

“Well-designed models that include competitive base salaries, commissions, bonuses and other incentives can motivate sales teams, underwriters and claims professionals to perform at their best,” LOAZ general-secretary Mavukeni Rufai told NewsDay Business in an interview.

“This can lead to increased sales, improved customer service and better risk management all of which contribute to the overall profitability and expansion of insurance businesses.

“Striking the right balance between fixed and variable compensation components is crucial to incentivise and reward individual and team-based achievements.”

Rufai noted that the local insurance industry has faced significant economic headwinds in recent years, which have created complexities in maintaining competitive and sustainable compensation structures for insurance professionals.

Factors such as high inflation and economic instability have posed significant challenges for insurance companies in this market.

As a result, insurance professionals have had to navigate an environment where their real purchasing power and ability to access competitive salaries and benefits have been eroded.

“This has made it increasingly difficult for the industry to attract and retain top talent, which is a critical concern for the long-term growth and development of the sector,” he said.

Rufai, however, indicated that the local insurance market had seen some innovative approaches to compensation models, including greater emphasis on variable pay structures, such as performance-based bonuses and sales commissions, to drive productivity.

The industry introduced employee stock ownership plans and other equity-based incentives to promote long-term commitment and alignment with company goals.

There is also utilisation of technology-enabled sales and service platforms to automate and optimise commission structures as well as flexible benefits packages that allow employees to customise their compensation mix based on personal needs and preferences.

To support the development of optimised compensation models in the insurance industry, Rufai some regulatory changes that could be beneficial include providing tax incentives or other financial benefits for insurers that implement robust employee retention and development programmes.

It also includes establishing guidelines or benchmarks for fair and competitive compensation structures within the industry; introducing more flexible regulations around variable pay and equity-based compensation to encourage innovation; as well as improving access to foreign currency and currency exchange mechanisms to help insurers maintain sustainable compensation levels.

“The outlook for compensation models in the Zimbabwean insurance industry is cautiously optimistic. As the economy continues to stabilise and the insurance sector grows, there is an opportunity for insurers to develop more sophisticated and adaptable compensation strategies,” he said.

“Incorporating data-driven insights, technological advancements, and global best practices can help insurers in Zimbabwe create compensation models that attract and retain top talent, drive performance, and support the long-term growth of the industry.”

However, addressing underlying economic and regulatory challenges will be crucial for the success of these efforts, he underscored.-newsday