The Sunday Mail
Tawanda Musarurwa
GOVERNMENT has committed US$175 million to compensate pensioners and insurance policyholders for value that was lost during the changeover from the Zimbabwe dollar to the multicurrency system in 2009 when the local currency collapsed due to hyperinflation.
However, Finance and Economic Development Minister Professor Mthuli Ncube emphasised that the funds would complement additional resources that would be put on the table by the local pensions and insurance industry.
“Government (has) committed a supplementary US$175 million towards compensation for the pre-2009 loss of value.
“We will be working with IPEC (Insurance and Pensions Commission) to come up with the necessary modalities on how these funds will be utilised,” said Professor Ncube.
“I am, therefore, challenging you as industry to do your part and account to your policyholders and pension fund members on how you managed their assets and liabilities and compensate them in line with the guidance that will be provided by IPEC.”
IPEC has since announced a set of guidelines for compensation.
According to the framework announced on Friday, insurance firms and pension funds will be required to submit their compensation schemes 90 days from the date the regulations become operational.
IPEC would subsequently approve the compensation schemes within 30 days of submission.
And compensation payments should be made within 30 days of approval.
During the hyperinflationary period between 2007 and 2009, the value of most savings (including insurance and pensions policies) was eroded.
Poor regulatory enforcement and demonetisation of the local currency were largely blamed for value erosion by the Justice Smith Commission of Inquiry, which was appointed in 2015 to probe the conversion process.
The commission concluded that “there was a huge loss of value to insurance policyholders and pensioners owing to failure by Government, the Insurance and Pensions Commission and the industry to set up a fair and equitable process of converting insurance and pension values from Zimbabwe dollars to US dollars.”
Players in the insurance and pensions sector were accused of poor corporate governance, arbitrary benefit calculations, shambolic record-keeping, including unsustainable and unjustifiable expenses.
Effective compensation, especially on the part of the firms and pension funds, will help restore public confidence in the sector.
Low confidence in the sector has stalled the deepening of insurance penetration in Zimbabwe.
Notwithstanding the importance of insurance in an economy, Zimbabwe has a 34 percent uptake of insurance products.
But 75 percent of that uptake is made up of funeral assurance products.
IPEC Commissioner Dr Grace Muradzikwa said: “Our industry is not where it should be both in terms of size and growth. There is no doubt that the industry would have been better positioned had we resolved the compensation issue.
“We cannot go forward as an industry without addressing our past.”
She said current low pension pay-outs are another albatross around the industry’s neck.
“We cannot justify our relevance when the average pension as at March is $14 929,” she said.
