Zim’s inflationary environment dents insurance industry trust

Zim’s inflationary environment dents insurance industry trust

Staff Writer

HARARE, Zimbabwe’s inflationary environment is seen as an impediment for the insurance industry to gain trust of insurance users, particularly in life segment.

BMI Research, in its Q2, 2020, Zimbabwe insurance report, said the environment has also distorted growth rates in the insurance industry.

“While premiums will ostensibly rise, consumer confidence in the industry is very low and providers face a long uphill road to regain the trust of insurance users, particularly in the life segment,” said BMI in a summary report.

It noted that inflation will also remain high, reducing any real spending power of the vast majority of consumers while simultaneously distorting growth rates in the insurance industry.

BMI said that economic outlook in Zimbabwe remains extremely challenging, and the country is expected to remain mired in recession in 2020, despite rising government consumption and anticipated reforms

The economic meltdown has severely dented the insurance sector with the country’s insurance penetration ratio declining from around 6% to below 2% over the last decade. The industry remains under significant pressure, with many companies seen to be financially unsound.

In the 2020 national budget, Finance minister Mthuli Ncube reviewed upwards the minimum capital requirements for insurance entities to $75 million to ensure that they are well-capitalised to protect value for policyholders and pension members.

The minimum capital requirements for short-term and funeral insurance entities was reviewed to $37,5m from $2,5m, life assurance and re-insurance to $75m from $5m and micro-insurance to $4,5m from $0,3m with immediate effect.