Zimbabwe identifies microinsurance as a critical instrument for delivering effective and efficient insurance services and products as well as promoting financial inclusion. However, “there is a long way to go for the insurance industry,” says renowned microinsurance expert Ayandev Saha.
By Donald Chidoori
Ayandev Saha says that the insurance industry in Zimbabwe must leverage on technology if it is to develop relevant micro insurance products.
Speaking on the sidelines of the first micro insurance short course organised by the Insurance Institute of Zimbabwe (IIZ) and the Insurance and Pensions Commission (Ipec) in Harare recently, Ayandev Saha warned that low insurance penetration and the failure to leverage on technology continues to hold the microinsurance sector in the country back. He also commended the role Ipec is playing in promoting microinsurance.
According to 2015 report published by The Microinsurance Network, only 1.1% of the Zimbabwean population is covered under microinsurance. Which is a pittance if compared to stats in the region. In South Africa, 64% of the population is covered under micro insurance while in Zambia, Namibia and Swaziland 22.2%, 15.1% and 21.4 of the population is covered by micro insurance respectively.
“The regulator’s presence and participation in the workshop shows the regulator’s keen interest on the topic,” he said “However, there is a long way to go for the insurance industry.“
“Currently the microinsurance penetration is very low and not much innovation has happened on servicing the mass market. Zimbabwe has huge opportunity in terms of microinsurance business. (However,) The insurance companies need to define the target market and then work towards providing right insurance solutions to the same target market,” he added.
So as a country where do we start?
Ipec recently launched a framework to provide a more structured method to deal with licensing, formalisation and regulation of micro insurance activities. The microinsurance framework is already there and companies should leverage on this to develop microinsurance products.
In addition: “The overall industry including regulator and insurance association needs to spent some time on consumer education and awareness on financial products like insurance,” he said.
Ayandev Saha also said that insurers should see microinsurance as a separate line of business, “it will be good if someone can maintain a separate P&L account.” As this would enable insurers to measure the impact of microinsurance on their bottom lines.
Currently there are only two registered micro-insurers in Zimbabwe and of the traditional insurers offering products for the low income population, the premium written for micro-insurance products is bundled together with that of conventional insurance products making it difficult to ascertain the contribution of micro-insurance products in total premium written.
On the development of microinsurance products, Ayandev Saha said that insurers should focus more on customized products that meet the needs of of the target market.
Mr Saha added that a good microinsurance product on its own would not be successful unless insurers develop, “suitable distribution channels mapped to the products.”
Technology could be used to bring efficiency in the distribution of micro-insurance products and also to reduce cost time from a client perspective.
Technology-based initiatives in Zimbabwe include index-based insurance supported by Old Mutual; Mobile money transfer services powered by Telecel, Netone and Econet and a Syndicated Mobile Payment Platform System (SMPPS) that was recently launched by Moonlight funeral.
Adopting technology also has some challenges of its own, like cost, cybersecurity and consumer data protection; which all insurers have to be wary of. Saha says costs can be reduced in micro insuers tape into existing micro finance institutions and other organisations like supermarkets.
Mr Saha also alluded to the fact that Ipec should take center stage in the development of national microinsurance products in health, crop and livestock.
“The regulator can take the initiative of designing and implementing some of the national schemes (e.g. health, crop and livestock) irrespective of whether there is any subsidy from the government. The regulator’s role can be more of project management and creating the right market place,” said Mr Saha.