Last week we published an article on the Top Five Challenges Facing the Insurance Sector in Zimbabwe, this week we will address the strategies and solutions that Ipec (Insurance and Pensions Commission) has put in place to mitigate these challenges.
According to Ipec Commissioner Tendai Karonga, fraud, poor corporate governance and high premium debtors have left a dent on the whole insurance industry that needs to be mended. Here is how ipec, in the words of Commissioner Karonga has been trying to mend this dent:
1. Insurance fraud
In order to arrest insurance fraud, we endeavour to conduct fit and proper tests on investors, directors and key personnel in the insurance industry while insurance companies should improve their internal process so that they are not easily manipulated.
Insurance companies should also make use of corporate governance guidelines, enforce water tight claim processing and internal control systems as well as upskilling claims handling personnel.
2. High levels of premium debtors
To address this problem, the Commission will, through the proposed amendments to the Insurance Act, make it mandatory for all insurance companies to publish their financial statements even if they are not listed on the Zimbabwe Stock Exchange. This will instill market discipline as stakeholders will be more informed about the companies’ financial status.
- Increase in Insurance Fraud threatening viability of the Industry
- IPEC fights insurance fraud
- Insurers at risk: Grace Muradzikwa
- Insurance, pension Bill goes to Parly
3. Poor corporate governance
To enhance good corporate governance, the Commission, in May 2017, issued a risk management and corporate governance guidelines framework, which should be fully complied with by all insurance companies by January 2018. The guidelines will change the governance paradigm for insurance companies in Zimbabwe by enabling them to adopt good corporate governance practices. Existing and potential policyholders can have confidence in insurance companies that have good corporate governance structures in place particularly those that timeously meet claims and do not abuse policyholders’ money.
The Commission has also increased its onsite and offsite inspections to ensure that insurance companies follow laid down procedures and practices. We also insist on publication of quarterly reports so that the market can assess on their own and reward good companies with business as well as punish bad ones by depriving them of business. These publications also act as a dashboard that gives warnings if something is wrong with the insurer’s management, which can prompt regulatory action.
The Commission also introduced a corporate governance framework to deal with corporate governance issues in the industry and also introduced Statutory Instrument 80 of 2017, which gives it power to deal with errant trustees of pension funds. IPEC can also accept or reject the appointment of any trustee. The law sets out the conduct, qualifications, term of office and the appointment of trustees. It is also mandatory for pension funds to issue out benefit statements to fund members so that they are in the picture of what would have accrued to them.
To enhance the capacity of trustees in managing the assets of the fund for the benefit of their members and beneficiaries, the Commission made it mandatory for the trustees to obtain a Certificate of Proficiency (COP) from accredited and reputable institutions. The COP qualification equips trustees with the capacity to make decisions that are for the good of the fund.
4. Poor claims settlement
This one of the reasons behind low confidence in the insurance sector. To address this problem, we have increased the minimum capital requirement so that insurers can have adequate reserves.
We encourage them to also invest in short instruments — liquid investments, which are quickly realisable instead of properties. The Commission continues to encourage insurers to have actuarially-determined reserves.
5. Fake insurance policies
The Commission, together with the industry, have introduced use of electronic cover notes for motor vehicle insurance as a way of reducing the issuance of fake insurance policies, which left policyholders exposed. We have also prohibited insurance touting through Circular 7 of 2017 as a way of protecting policyholders from harassment and potential fraudulent cover notes.