By Allan Mbotshwa

The short-term insurance industry in Zimbabwe continues to exhibit robust growth, underscoring its increasing significance as a cornerstone of the nation’s economy.

According to the Insurance and Pensions Commission’s 2024 First-Quarter report, the number of registered entities and persons in the sector surged by 5% to reach 1,262 by the end of March 2024, from 1,198 in the corresponding period of 2023.

During the period, the Commission registered one (1) insurance broker, five (5) multiple agents, one (1) corporate agent, and two (2) individual agents to bring the total number of registered entities during the first quarter of 2024 to nine (9).

This expansion is a testament to the sector’s resilience and its growing contribution to the nation’s economic landscape.

Often, short term insurance has been considered the anchor upon which the economy rests given its ability to generate fast cash that can be fed into other sectors of the economy.

Short term insurance experts have often argued in the event that something goes wrong, short-term insurance acts as a safety net, protecting a company’s bottom line.

First, it works by avoiding losses from happening in the first place by putting appropriate risk management procedures in place as recommended by insurance experts. And second, if the appropriate amount of coverage has been obtained, by returning the company to its pre-loss financial situation.

By serving as a safety net in the event of an unforeseen circumstance, short-term insurance offers a means of safeguarding a company’s financial line.

At a time Zimbabwe’s economy is facing uncertainty, short term insurance thus works as the much needed buffer.

The IPEC reports shows that the industry performed well in the last quarter of 2023 hence the margin increase this year with the gradual increase being driven various factors.

Out of twenty (20) insurers, seven (7) reported negative insurance service results indicating losses.

Nevertheless, the industry made ZW$43.65 billion in profit from insurance coverage with the sector reporting earnings before tax and after tax of ZW$1.08 trillion and ZW$968.51 billion respectively.

“The sustained growth in the short-term insurance sector is a positive indicator of the increasing risk awareness among Zimbabweans,” said Mr Chester Dhimairo, founding partner at Sahel Chartered Certified Accountants (SCCA).

“As the economy continues to evolve, so do the risks, and insurance becomes an essential tool for individuals and businesses to safeguard their assets and livelihoods,” he added.

The short-term insurance industry plays a pivotal role in the economy by providing financial protection against unforeseen events such as property damage, theft, accidents, and liabilities.

By pooling premiums from numerous policyholders, insurers create a risk-sharing mechanism that enables them to compensate for losses incurred by insured parties.

This risk mitigation function is crucial for fostering a conducive business environment, as it encourages investment and entrepreneurship.

Moreover, the industry contributes significantly to capital formation. A substantial portion of insurance premiums is invested in various sectors of the economy, including government securities, real estate, and corporate bonds.

These investments stimulate economic growth and create employment opportunities.

“The insurance sector is a major investor in the Zimbabwean economy, our investments in various asset classes support the growth of key sectors and contribute to overall economic development,” said Mr Polite Mawire, an Economic analyst.

The expanding insurance sector also has a positive impact on employment.

It creates direct jobs within insurance companies and indirectly through support services such as loss adjusters, brokers, and medical professionals.

This job creation contributes to poverty reduction and social development.

Short term insurance seeks to mitigate risk of loss and also costs of damage to assets insured. The short term industry effectively mobilises savings for any future loss those savings are then invested in the economy.

“A vibrant short term industry is healthy for the economy as it saves money for future use while meeting the costs of loss or damage of business assets. The challenge we face is the ability of this industry to pay fair value in the event of loss.

An unstable currency and inflation increases the costs of recovery of assets and reduces possible benefits paid by insurers. A well regulated and viable short term insurance sector is critical for economic stability,” said Mr Vince Musewe, a renowned economic analyst.

Furthermore, the industry generates substantial tax revenue for the government through various taxes and levies.

These funds can be utilized to finance essential public services and infrastructure development, further boosting the economy.

Conclusively, the short-term insurance industry is an indispensable component of Zimbabwe’s economic fabric.

Its growth trajectory, as evidenced by the increasing number of registered entities, is a promising sign for the nation’s economic prospects.

By providing financial protection, stimulating investment, creating jobs, and contributing to government revenue, the sector plays a vital role in building a resilient and prosperous Zimbabwe.

There have been concerted calls for the sector players to review their product offerings to buttress this growth going into the future especially at a time people are losing trust in life insurance