Ipec raises concern over ability of non-life insurers to settle claims

Ipec raises concern over ability of non-life insurers to settle claims

Tendai Karonga – Commissioner of Insurance, Pensions and Provident Funds

THE Insurance and Pensions Commission (Ipec) has raised concern over the ability of non-life insurers to pay claims timeously, as a result of high premium debtors and low liquid assets.


The Insurance Industry in Zimbabwe currently has 20 licensed non – life insurance companies,  8 reinsurance companies, 32 insurance brokerage firms, 31 Loss Assessors and 478 (as at 31 March 2017) agents all competing for the small market that has an insurance penetration of only 1.5%.

As a result there is stiff competition, a population with low awareness of the necessity and mode of operation of insurance business, high unemployment levels and low income levels that makes the sale of insurance products on credit terms inevitable.

This results in insurers having large premium debtors’ balances in their books of account that take long to be turned into cash, sometimes leading to failure of insurance companies to pay claims on time.

According to the Ipec 2017 First Quarter Non-Life Report, the asset base for non-life insurers was considered moderately concentrated. Cash and cash equivalents as well as premium debtors were the two major asset classes accounting for 21% and 20% of total assets respectively, as at 31 March 2017.

“The main concern of the Commission is on the significance of the proportion of total assets of 36% being held in fixed assets and premium debtors. Such concentration of assets in less liquid investments does not augur well for timeous settlement of claims,” Ipec said in the report.

This report comes after Ipec revealed in May this Year that some local insurance firms were already struggling to pay claims, resorting to negotiating payment plans with clients.

The high premium debtors and low investment in liquid assets are therefore not good news for clients who pay premiums timeously but face the prospect of their claims not being settled on time.

Failure to settle claims might have a significant impact to an industry people lack trust of, after the majority of insured people lost their life policies after conversion from the Zimbabwe dollar in 2009.

The Commission thus encouraged “insurers to structure the profile of their assets such that they increase the amount of liquid assets to match their liabilities.”

According to the regulator,  the inability to collect premiums written has also denied insurers the needed  liquidity to invest.

As such, “despite the industry average prescribed assets ratio being compliant with the minimum requirement, only eleven (11) out of the twenty (20) operating insurers were compliant with the minimum prescribed assets ratio (of 5 %). A total of two (2) insurers did not have any investments in prescribed assets,” Ipec said.

Prescribed assets are investments approved by government and are seen as assets good for infrastructure development.

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