The Sunday Mail
Tawanda Musarurwa
While the insurance sector has traditionally had a strong correlation with economic growth, there is also a growing recognition that the sector should play a key role in inclusive economic development.
For all the importance of economic growth (or even ‘economic development’ for that matter), its efficacy is not indifferent to the manner of its distribution.
That is why in 2015 the United Nations adopted the Global Goals, more commonly known as the Sustainable Development Goals (SDGs), as a universal call to action to end poverty.
Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa says the insurance sector can contribute to inclusive economic development with regards to, first, how certain policies are structured, and second, to the extent of how their funds are invested.
“Insurance has relevance to the Sustainable Development Goals. It offers a safety net to vulnerable households for them not to fall into poverty. For instance, with respect to Goal 2 (zero-hunger), agriculture insurance for crops and livestock brings stability in production by protecting farmers from the vagaries of the weather,” she said recently.
“In terms of good health and well-being, through health insurance, medical aid schemes and workplace compensation schemes households are also protected from the damaging impacts of accident injuries and disabilities, for example.
“Insurance can also shield against the high cost of education and ensure quality education through educational policies and even some life savings products. We are seeing in the local insurance market college funds, as parents are thinking ahead and putting aside a pot for the college education of their children. Insurance comes in to provide some of these product offerings, speaking to some of these requirements,” said Dr Muradzikwa.
“Insurance related to gender risks, maternity insurance and others targeting women such as SMEs insurance, Savings and Credit Co-Operative Societies, etcetera, all speak to SDG-5 on gender equality. And, lastly, Goal 8, decent work and economic growth, we have policies that encourage SMEs growth through the protection of assets.”
Although it is positive that such policies exist, most insurance policies – in their traditional forms – tend to exclude a majority of the population.
A 2020 Finscope study highlighted that the majority of the Zimbabwean population, largely based in the rural areas, live below the total consumption poverty line of US$70 per person per month (upper line).
“In urban areas, 37 percent of people live below the total consumption poverty line, while in rural areas, this increases to 86 percent of people,” reads part of the report.
Standard insurance policies tend to be beyond these individuals, which then necessitates players in the industry to develop micro-insurance (and micro-pensions policies), that should not only be downscaled versions of traditional policies but should address the needs of the majority.
At another level, insurance can contribute to SDGs through efficient investment of the pooled funds.
National Social Security Authority (NSSA) managing director Arthur Manase has expressed similar sentiments.
“The resources that we collect should be invested wisely. Globally, the insurance sector is a major driver for national development. The challenges we face, in terms of infrastructure development, can be effectively addressed through a well-coordinated approach by players in this sector,” he said.
“Investment in critical sectors such as agriculture, infrastructure development, power generation, to mention just a few low-hanging fruits, will go beyond growing our respective enterprises but will have great economic benefits for the good of Zimbabwe.”
In this regard, the country’s insurance and pensions regulator, in discussions with Treasury, has been approving prescribed asset status for a number of projects with strong social impacts.
“As IPEC we have been approving a lot of prescribed assets towards agriculture finance, and this year alone we have approved prescribed asset instruments worth about $250 million,” said Dr Muradzikwa.
“We have also been receiving a lot of applications for dams. The Kunzvi Project, for instance, if this could be funded the water problems for Harare would be a thing of the past.
“So, the expectation is that the industry will also look into these areas and contribute towards economic development, affordable and clean energy. We are also looking at renewable energy; I think this is a favorite right now.
“We have approved quite a number of prescribed assets in this regard. A case in point is the Guruve Solar Project, which is worth about $4,75 billion, which we have approved this year, and the insurance industry is also contributing towards that.
“The Commission is also approving prescribed assets for projects that are targeting SMEs and we have approved the project worth about $60 million to finance SMEs.”
Treasury has recently approved seven new projects as prescribed assets even as the insurance sector regulator continues to work on a new prescribed assets framework.
These approved projects seek to unlock resources for investments in social and economic development, for example, the Sahwira Agriculture US$20 million issue for capital expenditure and working capital financing for crop production and the Murombedzi Solar Park.
