Life assurance sector on the brink…as short-term business takes over

Life assurance business in Zimbabwe is on the verge of a total shutdown, experts have warned, calling on the insurance industry and government to work together to develop innovative products and other alternatives to save it.

This comes as the short-term business is taking over the life business against tradition.

Life assurance is a crucial component of financial planning and security, providing individuals with the assurance that their loved ones will be protected and financially supported in the event of their untimely demise.

However, statistics availed by the Insurance and Pensions Commission (Ipec) showed that just before the end of 2019, life assurance written business was worth ZWL$426 million, a figure which had dropped to ZWL$148 million by end of 2022.

The industry believes that the loss of confidence caused by the unresolved 2019 hyperinflation issues, coupled with inconsistent monetary policy changes was key to the loss of appetite for life assurance products.

Meanwhile, given the economic woes, experts believe the current framing of life assurance products no longer makes sense.

Ipec spokesperson, Sibongile Siwela said the onus was on the industry to come up with innovative ways to address these challenges, lest the industry dies.

“We have seen a new trend whereby short-term is writing more business than life assurance, whereas in the past it used to be the opposite,” she told NewsDay Business.

“What do we attribute that to? In 2019, we wrote business in the life insurance industry worth ZWL$426 million and as of the end of 2022, we wrote business worth ZWL$148 million. Do we allow the industry to die or do we come up with innovative ways to address these challenges?”

Zimbabwe Association of Pension Funds director, Sandra Musevenzo said people no longer believed in life savings anymore.

“There is loss of confidence in the industry because of what has been happening. Since dollarisation we have seen so much uncertainty especially around monetary policies.

“People no longer know whether to save or not. Policy pronouncements, for example, the Minister of Finance pronounces that we are now using US dollars and after five years it’s no longer in use.

“People are not sure whether to continue contributing in US dollars or not and what’s going to be in the next five years. People don’t then contribute, affecting life and pensions contributions. This is what has contributed to the demise we are in now. People do not believe in life savings anymore.”

Musevenzo noted that another threat to the life assurance sector is that people are getting more in greenback allowances which do not make it to life or pension deductions. This leaves the small Zimdollar amounts being directed to life savings.

“Since 2021/22, we have seen the collection ratio coming down to 50%. We need to collaborate to come up with solutions or else we are going for a shutdown on life savings,” she said.

Delegates, who recently attended the Insurance Institute of Zimbabwe Winter School in Nyanga attributed the fall of life assurance uptake to the irrelevance of products being offered by the industry.

“It has to do with the relevance of our products being offered. Life assurance used to make sense but this generation is more inclined to short-term products,” one delegate said.

“It would make a lot of sense having short-term products even on the life side. There are other companies outside Zimbabwe that actually offer life assurance products on a daily basis. It is something we need to consider.”

Experts believe that another factor which can shape the future of life assurance in Zimbabwe is the increasing penetration of technology and digitalisation in the industry.

With the advent of mobile banking and digital platforms, insurers are able to reach a larger customer base and offer more tailored products and services.

As more individuals recognise the importance of life insurance, insurers will be compelled to innovate and offer tailored products to cater for the changing needs of Zimbabweans.-newsday