MUTARE-The insurance and pensions sector has been hit by a low uptake of pension products and low investor confidence due to the hyper inflationary shocks prevalent in the macroeconomic environment, officials have said.
Insurance and Pensions Commissions (IPEC) boss Dr Grace Muradzikwa says the levels of disinvestment in monetary assets has been spurred by risk averse investors who are wary of a legacy of bank failures.
Dr Muradzikwa made these remarks while addressing a virtual launch of the 2020 Insurance and Pensions Journalists Mentorship Programmes (JMP), where she also revealed that despite these viability challenges the sector has remained resilient.
The IPEC commissioner said the prevailing low uptake of insurance products emanates from low confidence owing, mainly, to loss of value as a result of hyperinflationary and legacy issues, high levels of premium debtors, liquidity challenges and insurance fraud.
She said overall the sector recorded positive performance, with positive nominal growth of 522% between June 2019 and June 2020 while there was a nominal increase of its Combined Asset Base from ZWL$24.2 billion to ZWL$59.74 billion between April and June 2020.
“We are faced with a lot of challenges especially around product relevance, viability and low confidence levels.
“This loss of confidence and hesitation to invest in monetary assets is due to a legacy of bank failures and closures, we have a history of banks failing and depositors losing out, also the hyper inflationary environment has also contributed.
“Reduced uptake of pension products, is owing primarily to company closures, retrenchments and high unemployment levels have reduced disposable income. The sector has also been negatively impacted on its real estate investments due to reduced occupancy as companies embrace remote working and reevaluation of needs due to Covid 19.
“There has also been an upsurge of unplanned significant capital expenditures- investment into laptops where company previously had desktops, this equipment is necessary to support remote work,” said Dr Muradzikwa.
She said the Insurance and Pension sector plays a significant role in driving infrastructure development, as it owns close to 80% of all urban real estate in the country and general economic development.
The sector, it also emerged, is faced with a dollarisation conundrum as pensioners and insurance holders seeking products that at paid out in the United State dollar denomination, an anomaly as premiums are paid in local currency.
“Savings mobilisation is the largest source of domestic financing, it has a capacity to drive economic development and infrastructure development. If these funds are invested over long periods of time it amounts to significant investments.
“Notwithstanding all these challenges the industry has remained resilient. Industry is capital intensive, growth of its asset base, quite material and tangible, macroeconomic challenges we have remained resilient.
“Post dollarisation arrears were converted to the local currency and this represents significant investment loss for beneficiaries- we are engaging with government because of the significant loss of value to pensioners,” said Dr Muradzikwa.
Meanwhile, the National Social Security Authority (NSSA) acting general manager Arthur Manase urged the media to play its role of disseminating information on the roles that the government owned entities play in ensuring social security for vulnerable citizens.
He said the authority will embark on a decentralization program to bring services closer to beneficiaries, with plans afoot to set up ward and village offices
“As NSSA we are an institution which is there to serve the Zimbabwean community in general, we are a critical national institution that ensure social protection of the citizens.
“However, many people are failing to access the multiplicity of benefits of NSSA because of ignorance of the products and package benefits that they can get from us as an institution and the media can bridge this gap.
“We are going to set up offices even at lower levels to make it easier access to information on NSSA services without one having to travel to Harare for such services,” he said.
NSSA is also coordinating and collaborating with registered labour unions, which have networks across the country, to disseminating information on Covid 19 to build community capacity to manage at workplaces and households levels.
“This multifaceted approach to ensure that remote communities are reached,” said Manase.
