Increase in Insurance penetration key to economic growth: Luke Ngwerume

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By Donald Tafadzwa  Chidoori

Speaking at the breakfast meeting and launch of the Insurance Journalists Mentorship Program in Zimbabwe on 26 January, ZimSelector.com Managing Director Luke Ngwerume said that Zimbabwe’s negative growth could be mitigated by an increase in insurance penetration.

Zimbabwe’s insurance penetration rate has been on a free fall since achieving its highest insurance penetration rate of 5.7% in 2004 to its lowest of 1.5% in 2016.

Market reports indicate that at least 70% of homes remain uninsured and that the number of corporates and SMEs that are either un-insured or under-insured is high.

People and companies are shying away and dropping their full comprehensive cover for the cheapest cover that meets legal requirement like third party motor vehicle insurance.

“With unemployment on the rise and disposable income diminishing, the pressures to meet the demands of food, schooling and accommodation have taken priority – over insurance cover-.  We believe that an increase in insurance penetration will have a direct and positive impact on economic growth,” confidently said Mr Ngwerume.

This is because insurance companies have always been critical in the funding of capital projects that lead to economic growth.

“Insurance companies and pensions funds have funded many developments nationwide like; office buildings, shopping malls, housing developments, roads, dams, power stations, transmission lines, agricultural and mining activities,” he highlighted.

And for insurance companies and pension funds to continue contributing towards infrastructural development in the country that lead to economic growth there should be a subsequent increase in the insurance penetration rate which is currently sitting at 1.5%.

“Any country that is developed will always find a correlation between the level of development and the level of savings and most savings come from insurance and pensions,” said Mr Ngwerume.

Currently the asset base of Insurance companies in Zimbabwe sits at over $4 billion dollars just shy of the country’s national budget and if people would put their trust on insurance companies there will be enough internal savings for insurance companies and pension funds to reinvest in capital projects that will rebuild the economy of Zimbabwe.

“My theory is based on the past experiences when this country was under sanctions in post 1965, yet the country continued to grow. If you track the growth that was spurred on during that period you see that there is actually a positive correlation between the growth that was happening in terms of the infrastructure that was being made in the country and penetration rate of insurance in the GDP,” pointed out Mr Ngwerume.

Mr Ngwerume highlighted that for Zimbabwe to get back to these glory days, every Zimbabwean had a part to play. And the first step towards this journey was to develop an internal savings culture and the taking up of insurance products in the market. The second step was to abandon donor dependents and to only see Foreign Direct Investments (FDI) as just the cherry on the top, but not as the endgame.

“In fact for any FDI investor it’s always even safer to invest in an environment where there is a lot of local savings and that gives lot of confidence to the FDI investor to say that well if the locals trusts savings in their environment it means my investments will actually be protected,” he explained.

The problem however is that people have lost trust in the financial services sector in general and the insurance sector in particular since the hyper-inflationary period and the conversion era when a lot of people lost their investments in insurance companies and pension funds. This has largely destabilised the entire financial sector.

“We need this industry to operate properly because we know what the benefit of it working properly is to our own livelihoods,” Mr Ngwerume highlighted.

For this to happen there is a need to rebuild consumer confidence on the insurance sector. “This will be done through an improvement in, “transparency, corporate governance principles and the development of innovative insurance products,” said Head of Risk Management at Insurance and Pensions Commission (IPEC), Mr Josphat Kakwere.

ZimSelector.com Marketing Officer, Tafadzwa Chiutsi speaking at the breakfast meeting said that it was important that insurance companies develop affordable innovative insurance products for the poor to not only make certain that every Zimbabwean was protected from day to day risks but to also increase the insurance penetration rate.

Mr Ngwerume also highlighted that journalists were also key element in boosting consumer confidence in the industry, through creative elaboration of insurance products and informing the public on the importance of insurance cover.

“This is why we have gathered you here. You are right people to take us through this journey, you are the right people who can actually assist us to put Zimbabwe back on a pedestal from where it can form its own capital,” asserted Ngwerume.

The Insurance Journalists Mentorship Program in Zimbabwe is hosted and sponsored by ZimSelector.com, to enrich Journalists’ understanding of insurance and the dynamics of the environment within which it exists; so as to stimulate them to write more avidly and more frequently on the subject.

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