Sometimes it pays to voice your displeasure with something. In Zimbabwe, that is rarely the case and so when we see it happen, we just have to take a minute to celebrate. So, this is what having a voice feels like huh?
Insurance is one of the bedrocks of a functioning economy. We need insurance just as much as we need banking (especially credit). That is the case in Zimbabwe but those two industries – banking and insurance – to put it lightly, have a chequered past and are not viewed in the most positive of lights by the masses.
Zimbabwe’s currency problems led to insurance companies failing to honour their end of the bargain. After years of contributing real money, many insurance clients ended up getting peanuts as settlements. Insurance companies may have had an excuse but that didn’t make the sting any easier to bear.
Where insurance companies do not have an excuse is in the following areas that even the Insurance and Pensions Commission (IPEC) noted –
- the design and sale of products (e.g. funeral policies that don’t mature)
- unjustified delays in settling valid claims
- high penalties for policy terminations
- misleading marketing
IPEC heard the people’s complaints and engaged the insurers to resolve those issues. The first tangible result from that engagement are changes that are coming to funeral assurance policies. Apparently, funeral assurance accounts for 80% of all insurance policies in the country and so that was the best place to start.
Funeral policy changes
IPEC’s new regulations say when a funeral policy subscriber pays US$6000 or its equivalent in ZW$ in premiums, that policy will be deemed fully paid-up.
The subscriber will not need to keep paying premiums monthly. At that point they would only wait to collect their payout in the event of a covered member dying.
Before this change, a subscriber had to keep paying perpetually, until a death triggered a payout.
This unfortunately means that most insurance pay-outs won’t exceed that US$6000 either. That is despite the fact that the insurance companies would have had years with those insurance premiums, investing them as they see fit. It is what it is, I guess.
In terms of grace periods should a member default on premium payments, IPEC says the Insurance Act still applies.
- For policies in duration of force of over 5 years but less than 7 years, a grace period of 6 months shall apply.
- For policies in duration of force of over 7 years but less than 9 years, a grace period of 9 months shall apply.
- For policies in duration of force of over 25 years, a grace period of 25 years shall apply
The Act seems to imply that for policies that have not been paid up for 5 years or more, the insurance company has to send out a notice that the policy will be terminated if payment is not received within 14 days of receiving that notice.
So, insurance companies can no longer terminate policies the moment one defaults on payments like some were doing.
The social media pressure
We often complain about the scourge that social media has become on society. That’s still mostly the case but every so often we use social media for good. I believe the conversation that really put the pressure on IPEC to act originated on social media.
Some lady complained to a listening audience about the design of funeral insurance products in Zimbabwe. We had to comment on the story too.
The lady made some overgeneralisations, left out some parts that worked against the narrative etc but her points were well taken. Even insurance companies had to respond and so did IPEC.
This is the result of that. So, dear reader, please tweet away, craft that Facebook post as if your life depended on it. Who knows, you just might help make sweeping changes to some stubborn industry.
What’s your take?