The Sunday Mail
Tawanda Musarurwa
For a long time, local insurance policyholders and pensioners have had to bear the brunt of unscrupulous business practices in the sector.
Some of these dodgy practices include — but are not limited to, unjustified delays in settling valid claims, high penalties for policy terminations, misleading marketing claims, late payments of pension benefits and delay in the settlement of claims. Exorbitant administration fees that end up eroding members’ accumulated retirement benefits, unjustified repudiation of claims, and the design and sale of inappropriate products and services (for example, funeral policies that do not mature) are also included.
With funeral insurance accounting for around 80 percent of all insurance policies in Zimbabwe, the non-maturing funeral policies is one of the most common complaints.
“This funeral assurer (name given) has been deducting money from my salary every month for the past 26 years, and there is no indication that it will stop. In my view I have already bought coffins for several households,” says 53-year-old Rungano Tanatsa* (name changed) somewhat jokingly.
Mr Rungano has three dependants on his funeral policy, but according to his calculations he could have secured all their funerals within the first decade of paying his premiums.
Numerous Zimbabweans share his sentiment.
It is to this extent the insurance and pensions regulator has developed a regulatory framework to ensure fair treatment in the sector.
“(The) Treating Customers Fairly Framework provides key principles and outcomes to be observed by all insurance companies and pension funds to ensure fair treatment of customers,” said Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa.
“There are consequences for insurance companies and pension funds that unfairly treat their customers.”
The framework came into effect on June 1, 2021.
Although there is a general assumption that customers typically know what they want, there is a genuine concern by the authorities that the insurance and pensions sector is highly complex, hence policyholders and pensioners may be getting the short end of the stick due to their limited knowledge of the intricacies of the industry.
“Given the information asymmetry that may exist between insurance and pension service providers on one hand and consumers of their products and services on the other, the consumers may possess limited knowledge about insurance and pension products and services and are therefore, likely to be treated in an unfair and prejudicial manner,” said IPEC.
“Given the complexity of insurance and pension products, there is, therefore, greater possibility that most consumers sign up into these contracts with very limited understanding of their rights and obligations.
“This may lead to consumers, particularly those with low levels of financial literacy being treated unfairly and possibly suffer considerable financial losses in the process.”
Interestingly, an informal survey by The Sunday Mail showed that there are still high levels of mistrust around the insurance and pensions industry on the part of the general public.
This mistrust particularly emerged from value losses that occurred with the currency changes in 2009, as well as the re-introduction of the Zimbabwe dollar more recently in 2019.
But some of the mistrust is a consequence of unprincipled practices by some insurers and pension funds.
“How are these companies allowed to get away with reaping people of their life savings and investments. I have heard numerous people claim that either they were paid peanuts or didn’t get paid anything at all,” said an individual who preferred anonymity, but whose views are commonly shared.
In terms of enforcement, IPEC says it will “invoke the provisions of section 5 of the Insurance and Pensions Commission (Issuance of General Guidelines and Standards) Regulations, 2020 published in Statutory Instrument 69 of 2020, where an insurance or pension service provider fails to comply with the provisions of this framework.”
It will publish, in its quarterly and annual reports, the names of entities that have 20 or more valid complaints against them lodged with the Commission during each quarter or year.
Companies in the industry are expected to furnish IPEC with a typology report of the complaints received during each quarter, as part of their quarterly returns.
And “where an insurance or pension service provider has more than 50 valid complaints against it, during the quarter, the Commission may revoke the insurance or pension service provider’s registration, in terms of the Insurance Act (Chapter 24:07) or the Pension and Provident Funds Act (Chapter 24:09) as the case may be.”
Some observers, however, remain somewhat skeptical, arguing that the success of the new regulations is not likely to be indifferent to how effectively they are implemented.
