Life Assurance –A Key Economic Enabler

The life assurance industry is a key economic enabler that largely contributes to the country’s gross domestic product especially when there is high performance of non-traditional life assurance products such as pension fund and funeral assurance businesses.

By Noah Kupeta

Gross Premium Written for life assurers for the year ended 31 December 2018 amounted to $426.05 million, representing a 16.41% growth further confirming the significance of the industry to the broader macro-economic development of Zimbabwe.

Funeral assurance and pension fund business for instance, contributed $24.01 million and $18.67 million respectively from the premiums income translating to 18.59% and 12.20% growth respectively.

Life Offices Association secretary general Mr Mavukeni Rufai confirmed that the market is highly dominated by Old Mutual, Nyaradzo and First Mutual life assurance.

The life assurers should however adopt mechanisms that help to preserve policy values through embedding inflation protection mechanisms if they are to remain viable.

 Mr Rufai said much of life assurance success should be based on disposable valuable assets on the market and meaningful equities.

 “The asset base for the life assurance industry as at 31 December 2018 stood at $3.55 billion compared to $2.76 billion reported as at 30 September 2018, representing a further growth of 28.51%.

“Growth in asset base was mainly driven by an increase of 51.16% in the value of equities.

“The growth in equities’ value was due to unrealised gains that were driven by the rise of prices on the Zimbabwe stock exchange,” he said.

Renowned Harare based economist John Robertson said life assurance largely contribute to socio economic growth and development.

“The industry has been a big developer especially of property if you look at every city in the world, the big buildings-the multi-storey office buildings, they belong to insurance companies.

“They do long term investments, they can be very supportive of economic development, so in Zimbabwe you find all the buildings in the city centre are owned by these insurance companies.

“The industry is sustained by good incomes by the people who buy insurance premiums.

 “If you look at state pension fund which did start off when it became mandatory some years ago, they have built very big buildings around the country,” said Robertson.

 Regionally, economic performance of Southern African is anchored around an all-inclusive legal policy framework.

The total assurance market measured by gross premium in SADC, including Zimbabwe’s biggest trading partner, South Africa, with its 136 million population, contributes about US$42.5 billion on the global market.

Funeral insurance contributes 71% of the life insurance market in SADC (in terms of number of clients) and is taken up by 4.7% of adults.

Statistics from Botswana’s insurance regulatory board- Non-Bank Financial Institutions Regulatory Authority (NBFIRA)  shows that life assurance Gross Premium Written currently contributes US$325 million to the country’s economic performance.

Life assurance sustains demands or consumptions for goods and services which encourage production and employment which result in multiplier effect on economic growth.

In most cases, companies exposed to various risks of their liability, property, illness and disability of their employees and life of employees, have the possibility of managing those risks transfer to life insurance companies.

This allow firms to concentrate their attention and resources on their centre business which can lead to willingness and ability to take real investment which result in higher rate of economic growth. In other words, by creating an environment of greater security, insurance fosters investment and innovation of economic growth.

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