Insurance and pensions industry should retrace its footsteps
Staff writer
Nyanga: The insurance and pensions industry needs to go back in time and create value for the economy and policyholders, an expert has said.
This comes at a time when the financial services sector, despite efforts, is battling confidence issues as people are still recovering from the 2009 hyperinflationary losses and the 2019 currency reforms.
Consulting Actuary Tapiwa Maswera, during a smart cities and devolution masterclass hosted by Global Renaissance Investments in Nyanga, said that unlike other countries that had the liberty of abusing their economies on the basis of pension funds, Zimbabwe did not have a financial services plan.
“Not even one. We have never even decided. If you go to Australia right now, the financial services sector employs 40% of all Australians. They put USD$1.6 trillion, and 40% of all employed Australians work in the financial services sector,” he said, noting that the financial sector is 40% of GDP.
“In Zimbabwe, for some reason, we don’t quite learn well and entrench ourselves. Once we are entrenched, then we have this shifting culture, and when things start falling apart, we don’t know what’s happening.
“It’s a big problem that we have to somehow learn that change is good for us. We have to learn to create the kind of change that’s good for us, or else change will just come with change. And very often, it’s not good for us,” he said.
Maswera said insurance companies in the past failed to separate pension fund money from insurance money, and this is part of the problem the industry is facing today.
“I sat on the commission of inquiry. One of the things that happened was that we asked insurance companies: You know there’s a law that says pension fund money and insurance money must be separated?
“The insurance companies in Zimbabwe were not separating pension fund money and insurance money, and when the commission was finished, the regulator told them to separate pension fund money and insurance money.
“They didn’t even punish anyone, but the companies were breaking the law.”
Maswera said some companies went on to buy properties, and some created specialist property companies.
“You know quite a few property companies that are owned by insurance companies, right? I’m not going to mention them. Most of them are not in the insurance business. What they do is collect trade on those properties,” he said.
Maswera reiterated that the companies were neither creating value nor posting economic value into the future.
He noted that there was no investment in the economy, and the industry was dying as nobody was putting money there.
“Because there is no money, there is no premium income coming, and that really creates problems.
“My problem is, even actuaries who are trained were trained in a certain way and were trained to run insurance companies without inflation the other time. And when there is no inflation, these things that we train work,” he said.
Maswera said the economy needed to move from the consumption side of money and move towards value creation.
“The thing that we need to get away from is that we need to get away from the consumption side of money and move towards the value creation side. Africans, most of the time, when we talk of money, we are thinking of using it and consuming it, not using it for production, and that’s a very big disability.
“I hear people saying that Zimbabweans want to own houses. The reason we want to do that is because we don’t have pensions. Surely, if you don’t have a pension, you better have a house.”
Maswera added that insurance companies had a waiting attitude with the way the insurance industry was designed having changed.
He said that in the old days, all Zimbabwean insurance companies were mutual houses.
A mutual house is a company that is owned by policyholders.
“Now, if a company is owned by policyholders, it means the policyholders appoint the board of the company.
“The board of the company appoints the CEO, who appoints the officers of the company. So the officers of the company are talking about the auditor, the risk manager, the administrator, the actuary, and all those reporting to the CEO, who reports to policyholders. So policyholders were right in the centre of the insurance value chain,” he said.
“Somewhere around the year 2000 came this animal called demutualization.
Demutualization means that you are introducing shareholders into the insurance company, and shareholders make money by getting money from policyholders.
“But now it’s the shareholders who put the board together, right? And the board appoints the CEO, and the CEO appoints the actuary, the accountant, the risk manager, the auditor—everything, right?
“Now these people are reporting to the shareholders. So if, for instance, one of our insurance companies is going to court because it’s been told that it must pay big money to policyholders, “So our insurance industry is no longer customer-centric. Maybe that’s why they are leaving all of you. You could be customers, all of you.”
