Insurance sector has potential to revive economy: Expert
Insurance24 Reporter
HARARE, An insurance expert has said Zimbabwe’s insurance industry has potential to boost low savings appetite as well as local investments, which will counter over reliance on foreign investments.
Zimselector.com, an insurance training institution founder Luke Ngwerume during the institution’s inaugural Insurance Journalist of the Year awards ceremony said the insurance sector has proved to be a good net for prescribed assets which IPEC pegged at over a $1 billion in 2017.
“No economy can efficiently develop by relying on foreign debt and FDI alone. A country needs to form its own capital to compliment access to debt and FDI. If the country is reliant on debt it will increase the cost of development with negative impact on the pace at which it develops,” he said.
He added that a country also cannot develop efficiently through FDI alone and this is because FDI is fickle and can pull out as quickly as it came in if there are more favorable investment opportunities in other parts of the globe.
“So the best is to have a mix of all these three sources of development funding in an attempt to better manage risk,” he said.
Ngwerume said the insurance industry should work on restoring confidence in the industry so that the country can rebuild its own capital investment.
“I would hazard a guess and say that if we don’t change the attitudes of the current young generation then those generations which follow will be a real big fix,” he said.
According to IPEC, insurance companies and pension funds contribute 66% to institutional investments, 80% to property investments and 40% to bank deposits, hence the need to focus on the industry.
However, following a decade of lost insurance premiums due to the 2008 hyperinflationary era, Zimbabweans have remained skeptical about investing in sound insurance policies hence government should account for the lost savings.
“For too long now, the discourse around financial services has tended to dwell too much on the impact of the ravages of the lost decade, the period of hyperinflation, which unintentionally or otherwise has bred a new skeptical generation towards insurance and savings.
“If one was to conduct a survey to find out just how many of the young generation buy insurance and save diligently for the future, the older generation would be absolutely horrified with the results. This is because the lost decade had a direct and negative impact on this young generation’s view on savings and insurance,” said Ngwerume.
To this end, Zimbabwe instituted a commission of inquiry to determine how much savings was lost during the transition to a dollarized economy following a decade of hyperinflationary. The findings of the Commission are however yet to be made public.
