ZIMBABWEAN businesses and individuals have been urged to seek insurance cover to mitigate losses associated with risks and facilitate long term economic growth.
Insurance expert Mr Luke Ngwerume said the country’s insurance penetration rate is at its lowest in years, at about 1.5 percent, according to official statistics, a trend which does not augur well with economic trends.
He warned that the decline registered in the insurance sector in the last few years has created a financing gap in critical economic projects.
“In 1990 Zimbabwe was ranked as one of the most mature insurance markets in the developing economies with a penetration rate of 3.8 percent. In 2015 our penetration has dropped to 1.53 percent and declining. Why?
“Other than economic downturn the single biggest contributor to the change in people’s mindsets was – the crisis of 2006 to 2008. Many people’s insurance and pensions were eroded resulting in confidence erosion and a new generation of Zimbabweans at home and abroad that either don’t trust insurance or don’t know enough about it,” said Mr Ngwerume. “Against the backdrop of a shrinking economy this is not good news for a market that forms the backbone of the financial services sector of the economy. We believe that an increase in insurance penetration will have a direct and positive impact on economic growth.”
Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk or a contingent or uncertain loss.
Mr Ngwerume, who is managing director of ZimSelector.com, a local online insurance firm, said insurance has funded many projects nationwide such as office buildings, shopping malls, housing developments, roads, dams, power stations, agricultural and mining projects.
“In overall, insurance demand promotes growth. We recommend that given the relatively low-insurance culture and penetration regression experienced in Zimbabwe, efforts and policies should be geared towards the awareness and education on the benefits of insurance demand,” he said.
Zimbabwe has about 22 short term insurers, 11 life insurers and 31 brokers with gross written premiums on short term hovering around $210 million and gross written premiums life assurance at about $700 million, total short term assets at $391 million and total life assets at $1.57 billion.
Mr Ngwerume bemoaned the proliferation of bogus insurance agents who were preying on unsuspecting policy holders and sowing confusion, which destroys the sector.
He, however, acknowledged high unemployment levels which have eroded disposable incomes and the pressures to meet the demands of food, schooling and accommodation, which affect insurance update.
Of late observers say the number of vehicles insured under the minimum Road Traffic Act is on the rise as customers drop their full comprehensive cover for the cheapest cover that meets the legal requirement to insure their vehicles.
Thousands of homes also remain uninsured while the number of corporates and small to medium enterprises (SMEs) that are either un-insured or under-insured is believed to be high.
Recently, ZimSelector.com has championed an insurance awareness engagement programme with the media aimed at sensitising society and industry about the significance of insurance cover.