Insurance is often enjoyed only by the affluent that is why when bad things happen the rich seldom become poor, they continue their way of life as if nothing happened. They recover faster because insurance provides them with the money they need to get back to where they were before the unfortunate thing happened.
However, for the poor it’s a different story, when the poor suffer a loss they cannot just bounce back. They are like a punctured ball that badly needs a patch and some fresh air to really get back in shape. This leaves the poor more vulnerable especially to the effects of calamities like natural disasters, accidents or death.
by Donald Tafadzwa Chidoori
With only 30% of Zimbabwe’s population covered by insurance, most low income households deal with economic hardships through informal insurance arrangements between individuals and communities rather than through formally managed insurance schemes, largely because of the high costs associated with formal or market driven insurance products or services.
One thing for sure is that insurance is not only for the rich, insurance is for everyone. “It is not only the affluent people or the well to do people who have got the requirement to protect their assets, everybody wants to protect their assets and therefore insurance is relevant to the entire population in the country, for as long as they have got assets and for as long as they have got a life, and they have got dependents, these people need to be able to access insurance,” says ZimSelector Managing Director, Mr Luke Ngwerume.
True as it may that the poor also need insurance, the question however is, can the poor really afford insurance?
The quick answer is YES they can. There is now a thing called micro insurance and it’s tailored for poor people.
Micro-insurance is like insurance sold in sachet form. It is affordable, accessible and simple, such that even a vendor, a peasant farmer, a construction driver, can be insured to protect themselves against vulnerabilities to risks and economic shocks.
Of late there have been efforts in Zimbabwe to promote microinsurance. The Insurance and Pension’s Commission (Ipec) in June this year introduced a sound legal framework for the transaction of microinsurance business.
“The Framework allows players to offer products that target the previously excluded population such as small-to-medium enterprises, peasant farmers, vendors and other low income earners,” said Ipec’s Insurance and Microinsurance Analyst, Fidelis Kagura.
Ipec has also been on an awareness campaign drive to ensure that adequate knowledge about microinsurance is imparted to the potential market. Insurance companies have also developed more consumer-centric as opposed to product centric microinsurance products.
What Is Microinsurance
Microinsurance typically refers to products designed for low income individuals. The word “micro” reflects the relatively small transaction size of lower premiums, a concept similar to microfinance with small loans.
According to the International Association of Insurance Supervisors, it is “insurance that is accessed by low-income populations, provided by a variety of different entities, but run in accordance with generally accepted insurance practices.”
Insurers often have the misunderstanding that micro-insurance products are insurance policies with small premiums and little benefit payout. In reality, different from conventional insurance products, the design of micro-insurance products has some unique implications. A ‘good micro-insurance product’ must be simple, accessible, easily understood, valuable and efficient.
“Microinsurance should be simple in product design, underwriting conditions, premium collection, language (where possible vernacular language) and claims handling. IPEC encourages only a few or no exclusions unless it is absolutely necessary,” says Fidelis Kagura.
So How does Micro Insurance Work
Just like traditional insurance people contribute into a common fund if one suffers a loss he or she will receive help from that fund, the loss of one is thus shared by many, the only difference is that with microinsurance you only deal with small amounts.
What can you insure with microinsurance?
All the things that matter to you, your life, your health, your livelihood (property). Microinsurance can be found in all business lines, including life, accident and disability, health, property, and agriculture (crop and livestock) – relevant to the risks of low income households.
What are some of the microinsurance products in the Zimbabwean market?
This is the most popular form of micro-insurance in the country; these products come in the form of individual and group cash plans. Funeral micro insurance products are the most affordable, widely distributed and easily accessible insurance products in the market. Premiums range from 50 cents to $6 per month with benefits starting from $500. Distribution channels range from mobile, instore and funeral assurance companies. All the three mobile companies in Zimbabwe Econet (Ecosure), Telecel (Telecare) and Netone (One Cover) offer Funeral Cash Plans. In recent months big funeral assurance companies like Nyaradzo (Sahwira Lite) and Moonlight (Moonlight Cash Plus.) have also introduced funeral cash plans.
They are very few health insurance products in the market that cater for the low income people. However, the country’s biggest medical aid fund in terms of subscriptions PSMAS early this year introduced a low cost health plan Shield Plan, with premiums as low as $10 month with an annual global limit of $3000. Minerva Risk also has a package known as My Health/ Utano Hwangu for the low income earners whereby for as little as $3 per month; the cover offers a hospital bill payment, funeral cash benefit and a health savings wallet. Other companies also offer low cost Hospital Cash Plans, whereby premiums start from $3 and cash back plans start from $50 for each day spend in a hospital.
There is a lack of life insurance products for the low income earners; however the National Social Security Authority (NSSA) this year launched a pension scheme for the informal sector. The majority of Zimbabwe’s workers which according to Zimstat is 95.5% is in the informal sector and is deprived of social security.
Ipec is also working on a framework to regulate micro-pension schemes the framework is expected to speed up the process of the development of micro-pension schemes for the poor.
Companies such as Minerva also offer cutting edge life insurance solutions for schools, parents and scholars. Premiums are driven by the school fees starting from as little as $4 per student per term (which translates to $1.33 per month). Such a product ensures that your children can continue their education if you become disabled or lose your life. If you die or are more than 50% disabled due to a visible, external accident, school fees protect pays a one-off lump sum to your child’s school for all the remaining fees until your child finishes school. For example: If a parent/guardian dies and the child is in form 1, term 3 the policy would immediately pay to the school the fees from form 2 to form 6.
Non-Life Insurance Products
Agriculture and Livestock Insurance
In 2016 Zimbabwe’s largest integrated financial services group, Old Mutual partnered with Blue Marble Micro Insurance to introduce agriculture index insurance to offer drought protection for small holder farmers. Champions Insurance also have livestock microinsurance product for peasant, rural or communal farmers with premiums at $1.90 per month per cattle.
There are also low cost House Owners Insurance for people in the communal areas and urban areas. For example a house worth $30, 000 in Chitungwiza costs $2, 50 per month to insure, while a house in Mabelreign worth $70000 costs $5, 80 per month to cover. Insurance cover in rural areas for houses worth at least $10, 000 cost 80 cents per month to insure.
Most low income earners cannot afford home contents insurance policies, gadget insurance policies are there to help low income earners to protect selected gadgets that are important for their small business like cellphones.
Companies such as Nicoz Diamond and Old Mutual offer gadget Insurance
There are also Legal aid insurance products to help the poor mitigate against litigation risk. Such policies are either provided for by insurance companies or legal aid societies.
Legal Aid Societies are akin to Medical Aid Societies in their functioning. Members subscribe by paying monthly fees which they can claim to pay on their behalf when they engage legal services. Legal aid insurance policies help financially disadvantaged people with legal services which they normally cannot afford to pay due to high litigation costs. Legal Aid Insurance was crafted to enable the majority of Zimbabweans afford legal representation. The product is intended to cover any Zimbabwean resident who has attained the legal age of majority. Premium charges range from $3-10 per month. The cover includes but is not limited to: Criminal cases, Retrenchment/unfair dismissals, Divorce cases and Debt collection. With legal aid insurance even the poor can enforce their rights or defend themselves in the event of litigation. Legal aid insurance has these cover labour cover, civil cover and comprehensive cover. Ipec registered companies such as Coverlink and Champions Insurance offer legal Aid Insurance.
The bottom line
It doesn’t matter what you do, or where you work, everyone needs insurance and the good thing is that even the poor can afford insurance and leave a life without worry without fear that’s if they are insured.