After a three-decade stint in the insurance industry with short-term insurer NicozDiamond, Mrs Grace Muradzikwa was recently appointed as Commissioner of the Insurance and Pension Commission (Ipec), the industry regulator.
Market watchers say there are a lot of issues in the sector that need to be resolved, not least the outstanding compensation to pensioners whose contributions were eroded during the transition from the Zimbabwe-dollar era to the multi-currency system in 2009. Our reporter Debra Mutabvu recently interviewed Mrs Muradzikwa on her new role
Q: You were recently appointed Insurance and Pensions Commission (Ipec) Commissioner. What is your vision for Ipec for the coming years?
A: The Commission’s vision in terms of the current strategic plan is to have a stable, safe and sustainable insurance and pensions industry through regulatory excellence by 2022. Whilst the Commission came up with this vision before my appointment, I share the same vision, which is to see an insurance and pensions industry that is inclusive of the majority of the population, sustainable and earns policyholder and pensioners’ trust. The industry that also contributes significantly to socio-economic development in line with the Vision 2030 as espoused by Government.
However, for us to achieve this, there is need for collaborative efforts among all the critical stakeholders, including Ipec, insurance entities and pensions funds, Government, policyholders and pension scheme members, among others. We must all put our heads together to make sure we have a stable, safe and sustainable industry.
I would want to see the insurance and pensions industry playing its primary role of risk mitigation, payment of claims and providing a decent pension to the elderly and mitigating old-age poverty in an effective and efficient way.
In line with cardinal principles of insurance, insurers should exercise utmost good faith and ensure fair treatment of their customers.
Similarly, pension funds should be administered with utmost good faith to meet reasonable benefit expectations of pension scheme members.
The investment performance of pension funds should exceed what an ordinary investor would have done without investing in a pension fund.
Ipec, in turn, comes in to regulate in a transparent and fair manner while Government creates the right environment for the industry to thrive.
That way, we would be guaranteed of a stable, safe and sustainable insurance and pensions industry even beyond 2022.
Q: You have been in the industry for years now, what have been your thoughts of the industry. What are the challenges and opportunities in the industry. How has the industry changed over the years
A: My professional dream as an insurance practitioner has always been achieving excellence in delivering customer-centric products, policyholder value and maximising shareholder value. I believe I managed to do that given the good record of accomplishment of all the institutions that I worked for.
Having served the industry as a market practitioner for the greater part of my career, I took a deliberate decision to serve the market as a regulator.
Drawing lessons from the experiences I have had in the market, I believe I can contribute to the development of the industry.
Some of the challenges facing the sector include outdated legislation, low confidence arising from the loss of insurance and pension values after the currency conversion from Zimbabwe dollar to the United States dollar in 2009, weak corporate governance systems in some entities, poor record-keeping and delays in the settlement of claims or benefits payment.
However, opportunities also abound. For instance, the country can benefit from prescribing the requirement to insure exports and imports with the local insurance industry.
It can also benefit from insisting on mandatory local insurance of all insurance requirements for infrastructure projects.
In terms of geographic location, the country is a transit route to South Africa, which is the largest economy in the region.
This, therefore, presents opportunity for motor insurance under the Comesa Yellow Card and Motor Insurance Pool.
Opportunities for growth of the pension industry lie in the growth of the real sectors of the economy since pension arrangements are generally conditions of employment.
The informalisation of the economy presents opportunities for micro-insurance and micro-pensions, which can target MSMES (Micro, Small and Medium Enterprises), women and youths.
According to the statistics we have, innovative insurers have recorded huge business in this market niche.
Therefore, this shows that while there may be challenges, those who are innovative can identify and serve a niche market that gives them good returns.
Q: What reforms are you coming up with to address some of the challenges that you have mentioned above?
A: There are a number of legislative and supervisory reforms that the Commission is implementing to ameliorate challenges facing the sector.
The Insurance and Pensions Commission Act, the Insurance Act and the Pension and Provident Funds Act are undergoing review to close the identified legal gaps so that Ipec can effectively and efficiently regulate the insurance and pensions industry for the protection of policyholders and pension scheme members, as well as our regulated entities.
We are also instituting pension reforms in collaboration with Government to ensure the sector achieves its primary objective of providing better and sustainable old-age retirement benefits.
Q: Zimbabwe’s pension industry is being shunned by citizens due to low levels of confidence in pension schemes. How do you intend to regain citizens’ confidence?
A: Whilst the loss of values during the conversion from Zimbabwe dollar to the United States dollar affected people’s confidence in the sector, the confidence has been building up over the years. The fact that Government appointed a commission of inquiry to look into the loss of insurance and pension values after dollarisation shows Government’s commitment to restore confidence in the sector.
The Commission, through its policy advisory role, advises Government on the need to ensure there is macro-economic stabilisation, which guarantees the value of pension savings.
We are also enhancing consumer education to sensitise the public about the need to save for retirement to avoid old-age poverty.
As has been alluded to, the Commission is also reviewing legislation to improve regulation, particularly on issues to do with market conduct.
Insurance companies and pension funds are expected to treat their customers fairly because with policyholders and pension scheme members, there is no insurance and pensions industry to talk about.
Q: Ipec recently announced a compensation framework to policyholders whose claims were eroded during the conversion of values from Zim-dollar to the United States dollars during the February 2009 period, how far have you gone with the issue?
A: We requested pension funds to submit their compensation plans in line with the recommendation of the commission of inquiry and as adopted by Government. Some have responded and we are analysing the responses.
On the other hand, others requested more time to consult with their stakeholders.
We continuously consult Government through the Ministry of Finance and Economic Development, which is our parent ministry.
Q: Pension contribution arrears have been on the increase over the past few years, partly caused by companies across all industries that are finding it difficult to deduct and remit monthly contributions from workers’ salaries. Are there any measures that you are set to institute that will protect workers and their benefits?
A: It worth noting that deficits are applicable to defined benefit funds, of which the numbers are now insignificant when compared with defined contribution funds. We acknowledge the challenge of contribution arrears and the Commission is seized with the challenge.
The Pension and Provident Funds Bill has strong provisions on this.
The pension reforms referred to are also meant to revisit the design of pension schemes to ensure they are sustainable.
The Commission is also sensitising trustees on their roles to ensure that sponsoring employers remit contributions to pension funds within 14 days after the end of the month to which they refer as per the provisions of the law.
We are also encouraging pension funds to enter into payment plans with sponsoring employers so that they can liquidate outstanding contributions over time considering that some of them may be failing to remit contributions due to incapacitation.