NSSA’s Accident Prevention and Workers’ Compensation Scheme: Lessons for short-term insurers

Tawanda Musarurwa

AT a basic level, insurance is a financial agreement that protects an individual or an entity from financial losses by helping cover costs if something unexpected happens.

To this extent, the National Social Security Authority (NSSA)’s Accident Prevention and Workers’ Compensation Scheme (APWCS) – which covers employees for work-related injuries and illnesses – is the biggest single ‘insurance scheme’ in the country.

With the Zimbabwe National Statistics Agency (ZimStat)’s 2024 Third Quarter Labour Force Survey placing the country’s formal employment rate (non-agriculture) at 959 995 individuals (approximately 30 percent of total employment), and with the APWCS mandatory for all formal employees, the scheme’s coverage is extensive.

Numbers do not lie.

The APWCS stands as Zimbabwe’s most comprehensive insurance programmes.

The country’s insurance sector is a vital component of the economy, offering coverage for motor vehicles, property, health and more.

But it has long struggled with the problem of low penetration rate.

According to official figures, Zimbabwe’s insurance penetration rate stood at 1,6 percent this year, down from 1,8 percent in 2023.

There are key lessons that policymakers and private sector insurance players can draw from the APWCS.

The case for mandatory insurance

The cornerstone of the national social security scheme’s APWCS is its mandatory nature.

Employers are legally required to register their employees under the scheme, ensuring widespread participation and risk pooling.

This approach not only guarantees coverage for workers, but also stabilises the scheme’s financial base.

The APWCS model thrives on risk pooling – spreading financial risks across a large and diverse base of industries and regions – which ensures the sustainability of the scheme, even in the face of large claims.

The short-term insurance sector could advocate for mandatory models in high-risk areas, such as agriculture insurance (given increasing climate change impacts).

For instance, mandating basic insurance for disaster-prone regions or industries like mining and agriculture could expand coverage, while reducing financial strain on individual insurers.

Interestingly, the best performing segment of Zimbabwe’s short-term insurance sector, for example, is the motor vehicle insurance segment, which is mandatory.

According to data from the country’s insurance and pensions regulator – the Insurance and Pensions Commission (IPEC), the motor vehicle insurance segment accounted for 43 percent of the sector’s revenue in the third quarter of this year, followed by fire at 17 percent and farming at 11 percent.

Mandatory insurance schemes are not a novel phenomenon; several countries have variations of such schemes.

For example, in Germany residents are required to have health insurance, and is provided either through statutory health insurance or substitutive private health insurance.

Similarly – and closer to home – in Kenya residents who are 18 or older and have an income are required to register with the National Health Insurance Fund (NHIF).

But the success of any mandatory system is not indifferent to the extent of its regulatory backing.

NSSA’s APWCS, for example, operates under strong legal backing, which ensures adherence to its requirements.

The scheme was established as provided for in terms of Section 3 of the National Social Security Authority (Chapter 17:04).

And it is governed by Statutory Instrument 68 of 1990 – National Social Security Authority (Accident Prevention and Workers’ Compensation Scheme).

While, in many insurance situations, the burden of proof falls on the client or policyholder when filing a claim, legal practitioner Mr Nobert Phiri says the APWCS is a “no-fault compensation scheme”.

“From the reading of the Statutory Instrument, it is apparent that the scheme is a no fault compensation scheme in that the injured worker does not have to prove any negligence on the part of the employer before he is entitled to compensation,” says the legal expert.

Such a model may appeal to insurance consumers, some of whom have complained about onerous claim filing processes on the part of some insurers.

An effective legal framework is key for maintaining an insurance scheme’s integrity and effectiveness.

The short-term insurance sector could benefit from stronger regulatory support.

While the Insurance Bill, which was published in 2021 seeks to replace the Insurance Act (Chapter 24:07), players in the local insurance sector should lobby for regulations that encourage more people to take up insurance.

But, all things being equal, the law should mandate basic coverage in critical areas only.

In a 2013 scholarly article titled ‘The review and analysis of compulsory insurance’ published in the Insurance Markets and Companies Journal, Yueyun Chen and Dongmei Chen contend that mandatory insurance should have a fundamental social benefit.

“Compulsory insurance will be desirable when it is related with some social risk. A social risk is a correlated risk with big potential losses, i.e. many groups and people may be directly affected simultaneously,” they write.

“As a result, conventional insurance fails since the business insurance is built on the law of large numbers and individual risk’s independence.”

For instance, with climate change exacerbating risks for small-scale and subsistence farmers in the country, mandatory agriculture index insurance can provide a safety net for these farmers who typically do not insure their crops and livestock.

Beyond compensation

The APWCS does not stop at financial compensation.

The scheme also provides medical care, rehabilitation and support for dependents in cases of workplace fatalities.

This comprehensive approach increases the scheme’s value to beneficiaries, ensuring it meets both immediate and long-term needs.

Short-term insurers could adopt this model by bundling additional services with their policies.

For example, motor insurance could include roadside assistance, while property insurance might come with risk assessment and disaster preparedness advice.

These value-added services could differentiate insurers in a competitive market and attract more customers.

Currently, product bundling is not common among local short-term insurance providers.

A survey carried out by The Sunday Mail showed that product bundling is typically used by medical aid societies and life assurers, wherein they combine their primary offerings with funeral insurance and travel insurance, respectively, for example.

IPEC promotes product bundling in the insurance sector as a strategy to drive microinsurance products.

“Microinsurance products can be bundled (bought together) with other insurance products which can be microinsurance, other financial products or non-financial products,” says IPEC in its updated Microinsurance Regulatory Framework.

Small is the new big

While the coverage of the APWCS is already broad, it has the potential to be more extensive, given NSSA’s plans to introduce a social security scheme that caters for the informal sector.

Zimbabwe’s MSMEs sector is vast.

Data from the Finscope Micro, Small and Medium Enterprises Survey Zimbabwe (2022) indicated that the country had 1 639 807 micro, small and medium enterprises (MSME) business owners.

The study also has a broadened definition of MSMEs that includes 1,1 million “self-employed individuals”.

This increases the number of MSME owners to 2,7 million, and boosts the sector’s total employment to 3 006 562.

Said NSSA deputy director marketing and communication Mr Tendai Mutseyekwa:

“The latest on the informal sector scheme is that we are waiting for ZimStat to present findings of the needs assessment survey, which will inform scheme’s construct.

“It will then be subject to extensive client feedback before trying it on pilot basis. Occupational, safety and health will be included.”

Extending coverage to the informal sector is also a challenge that the insurance sector has been grappling with.

IPEC has long been working with insurers for the development of insurance products suitable for MSMEs, particularly through the micro-insurance framework, which was initially launched in 2017.

As at June 30, 2024 Zimbabwe had four operating micro-insurers, and three of them were registered during the second quarter of this year.

The country’s short-term insurance sector has much to learn from NSSA’s APWCS.

Mainly because of the scheme’s mandatory nature, it offers a roadmap for building a more inclusive and sustainable insurance market.