By Martin Kadzere
The Insurance and Pension Commission has started engaging stakeholders on compensation framework for policy holders and pensioners whose savings were wiped off during the conversion of values from Zimbabwean dollars to US dollars a decade ago.
This comes at a time when Government said it would “assess” the potential prejudice.
Last year, the commission of inquiry, which probed the process used to convert the benefits before and after dollarisation confirmed a “huge” loss of value to policy holders and pensioners and recommended compensation for the loss suffered.
The commission, appointed by former President Robert Mugabe and led by retired Justice George Smith, said high levels of inflation, currency debasing, dollarisation conversion process and de-monetisation were the main reasons of the loss of value.
Government commissioned the investigation in 2015 into how pensions and insurance benefits were paid out following a big outcry from pensioners and policy holders.
Pension fund values were badly eroded in values partly due to devastating hyperinflation, which soared to a record 500 billion percent in 2008 according to the IMF.
A sample of selected complainants told the commission that they received insignificant amounts as low as US$0,08c after several years of working while some got zero values owing to lack of benefit inflation-indexation and currency de-basing.
While the total prejudice suffered would not be quantified, the commission was satisfied the industry had “reasonable capacity” to compensate thousands of policy holders.
A stakeholders meeting, convened by IPEC, the regulator of insurers and pension funds is expected to discuss the compensation framework. The Government appointed IPEC to implement the recommendations proposed by Justice Smith commission.
“The main objective is to discuss compensation framework,” said IPEC in a circular to industry players.
Fiscal policy director in the Ministry of Finance and Economic Development Pfungwa Kunaka told insurers at the Zimpapers insurance awards ceremony in Bulawayo that the Government was already working on assessing the prejudice.
“We are still in a process of trying to see… the devaluation that we experienced in our pension benefits; we are going through a due process,” said Mr Kunaka.
As recommended, the compensation framework would take into consideration the criteria for assessing prejudice in relation to the insurance and pension contracts, the factors that caused loss of value, the shortcomings of the conversion and soundness of the industry. It said the compensation shall be from 1996.
The commission proffered compensation guidance of the following products; Wit-Profit Insurance Policies, Investment Contract or Cash Accumulation Policies, Unit-Linked Policies, Inflation- Indexed Policies, Unilateral Terminated Funeral Contracts, Terminations due to Currency Debasing, Guidance on Stopped Premiums, Pension Benefits and National Social Security Authority’s pension scheme.
Sponsoring employers with outstanding pensions would be obliged to honour their obligations.
While the commission noted that the other reason for the loss of value was due to industry poor practices — here compensation will be expected from the private sector — the main reason was harsh macroeconomic environment characterised by hyperinflation.