Tough times for Zim insurance firms, but opportunities abound

Zimbabwe’s over two decades economic crisis has left the insurance industry on the brink after a steep decline in in the uptake of coverage products.

The insurance sector has been battling confidence issues dating back to 2009 while currency changes in 2019 have led to a severe erosion of income.

Such has been the loss of confidence in the sector that it has struggled to grow and rates are at an all-time low.

Deliberations at the Insurance Institute of Zimbabwe annual conference in Victoria Falls have shown that the insurance sector is an important pillar in economic development, and over the years has been key to infrastructural development.

However, the problems in the southern African country mean the sector requires strategic partnerships to stay afloat and arrest its waning fortunes.

Strategic partnership refers to a contractual collaborative arrangement between two organisations to help them work together and achieve individual corporate goals.

At the annual conference, strategic alliances and integration where noted as key and necessary ecosystems that can help the insurance industry to deliver value beyond insurance services.

Yeside Oyetayo of Rector College of Insurance and Financial Management in Nigeria told delegates at the conference that most strategic partnerships were in insurance facilitate market entry, risk and reward sharing, technology sharing and joint product development.

Traditional models of insurance no longer deliver on the scale of growth that the industry requires to function effectively in a changing economy, she noted.

“The growth of the insurance companies cannot be achieved without strategic partnerships. Insurers have to come to the realisation that in-house efforts alone will not lead to their desired growth projections,” Oyetayo said.

“Some of the partnerships required include distribution, services and technology. However, technology it is not a one-size-fits-all arrangement. Creating successful alliances or partnerships is not easy and there is no clear-cut approach to ensuring it is sustainable and valuable.”

Oyetayo said partnerships must strategically be focused on growth drivers, revenue optimisation strategies that are mutually beneficial to the partners.

Such strategic alliances usually create new channels and drive innovation in products and processes with academics and innovation hubs.

In Zimbabwe, there are huge opportunities, especially in the agricultural sector to facilitate growth of the local insurance market.

Insurance penetration is the amount of insurance premium in a country expressed as a percentage of the gross domestic product (GDP), which is the market value of all goods and services produced in a country at a particular time.

Oyateyo said penetration was also an indicator of the level of development of the insurance sector in a country. The higher the penetration rate, the more developed the insurance market.

“The Zimbabwean business environment has been turbulent due to policy shifts and macroeconomic instability, characterised by exchange rate volatility and high inflation rates,” Oyeteyo said.

The erosion of disposable income coupled with uncertainty over the ability of the sector to cover claims against the impact of the COVID-19 pandemic have resulted in low appetite for insurance products while change of functional currency affected consumer confidence largely because of the loss in value to policyholders.

But government believes the sector can do more.

Deputy director, financial sector policy in the Finance ministry, Matthew Sangu told the convention that the emergence of COVID-19 was a test applied to organisations and it is with the same mindset that the industry should be resilient and keep up with accelerated trends.

“Insurance, is all about risk management, as you cushion businesses and the general public which wait for a crisis to happen before they plan on how best to manage it.

“I challenge you to build your strategic plans that grow you, bigger and stronger in placing solutions to business uncertainties in the country. Ladies and gentlemen, government launched the Zimbabwe Financial Inclusion Strategy in October 2022.

He noted that while financial inclusion in the country was now at 83% against a target of 90%, the uptake of insurance remained low at 22% in 2022, down from 26% in 2014, driven mainly by funeral insurance, which accounted for 72% of those insured.

However, formal insurance remained low, at 24% up from 5% in 2012.This is attributed to high cost of insurance and lack of knowledge, notwithstanding that Zimbabwe and the global community is facing new climate change threats of drought, pandemics and disease and cyclones, so on.

Sangu added that organisations needed to devise resilient strategies that help them achieve bold aspirations, developing scenarios and not forecasts, creating a hedge of big move portfolios, and adapting dynamic strategies.-newsday