Aggressive Econet ‘distorts’ short term sector

NDAMU SANDU

Short term insurers have accused Econet Wireless Zimbabwe of distorting the industry by offering freebies which are more than half of the premium paid for third party motor insurance.

Under Ecosure Moovah, the group offers a 10 litre fuel coupon and $5 airtime to motorists who buy insurance cover from them. Ecosure Moovah is under Econet Insurance Private Limited, the group’s short term unit.

The move has riled other short term insurers who see it as rate under cutting which is a threat to the industry.

An executive with a short term insurer told Business Times that there was now a huge distortion in the sector.

“How are they going to pay for the claim if they are giving out freebies in excess of 50% of the premium? Econet could be using its big balance sheet or that of reinsurers which is unfair,” said the executive who requested not to be named.

“What we hear is that they are not holding any risk but passing all of it to the reinsurers which is not normal practice.”

Another executive also said that while the incentive shows that “competition has become cutthroat”, it was unsustainable in the long term.

“It’s a discount on the pricing. How long that will last is the question especially when everyone else is reviewing prices,” he said.

But Econet shot back saying every business has its strategies to reward clients.

“Every registered player has its own strategies for rewarding its clients and we have seen a number of promotions from a number of players in the market. We are a regulated business and we place the customer first in everything we do,” the company said.

Asked what percentage of risk it was passing to reinsurers, Econet said risk cessions to reinsurers were a function of the nature of the risk, value at risk, risk appetite and one’s level of capitalisation.

“The key variables vary from risk to risk. We employ experts who meticulously determine risk retentions per class of business and there is no one-size fits all when it comes to risk retentions,” Econet said.

In the outlook, the group sees Econet Insurance playing a significant role in transforming lives by de-risking everyday life in business, family, and the community.

Econet said the insurance penetration in Zimbabwe has remained low at around 5% and it was motivated to enter the short term business in response to a call by the Insurance and Pensions Commission (IPEC) for players “to raise their game to make insurance and risk management service available to the entire population”.

“We believe we can play a part and help drive insurance penetration,” it said.

In May, Econet appointed insurance guru Nathan Chikono as general manager Econet Insurance as the group announced its arrival in the short term business.

An experienced insurance executive, Chikono was until April 2018 managing partner at Momentum Insurance Brokers. Before that, he was managing director of Champions Insurance for six years. Between 2002 and February 2008, Chikono was managing director of Tristar Insurance, a short term insurance arm of First Mutual Holdings Limited.

Analysts say Econet has been able to bulldoze its way in the sectors in operates in due to a strong balance sheet and aggression.

But the short term business could be a new game all together as there is intense competition, according to experts.

Three companies namely Cell Insurance, Zimnat Lion and Old Mutual were the market leaders in terms of Gross Premium Written with a combined market share of 47,92% in the first quarter ended March 31, according to an industry report by IPEC.