Data integrity conundrum threatens Zim insurance sector

 

CLOUDINE MATOLA

Finalising the pre-2009 compensation deal  for policyholders who lost value of their investments when the government adopted a multi-currency system, abandoning the Zimbabwe dollar to tame  runaway inflation that precipitated the collapse of the local currency, has proven challenging due to poor data integrity in Zimbabwe’s insurance and pensions industry.

The value of the Zimbabwe dollar-denominated investments was instantly destroyed by the conversion to the US currency,

When policyholders were left counting their losses following the monetary action that caused the Zimbabwe dollar to collapse at that time, industry confidence reached an all-time low.

 

During the conversion process, policyholders lost their investments, estimated to be more than US$3bn , resulting in huge investments turned into few cents or dollars.

Additionally, players in the sector told Business Times payment of compensation was a crucial step in reviving trust in the insurance and pensions industry.

The general public is worried whether justice will be done for the value lost.

 

However, the process is being threatened by lack of granular data.

Last year IPEC ordered insurers and pension funds to submit 2009 compensation plans by December 31, 2023.

However, of the 1 200 pension funds that submitted plans, only one – the Mimosa Pension Fund- had complied with the compensation scheme requirement.

IPEC Commissioner Grace Muradzikwa stated that the non-compliance was brought about by a lack of granular data , which the compensation criteria required.

However, the pension funds lacked.

“We have a serious problem of data.We received and reviewed 1 200 compensation schemes against the expected 1 264 compensation schemes,” Muradzikwa said.

She added: “But, only one compensation plan (Mimosa) met all the requirements and has been approved. So, we are assessing these compensation plans in line with the law, which is Statutory Instrument 162. They are saying, let us use estimates and judgments. So, I say it’s the law vs practicality.”

 

Tapiwa Maswera, an actuary, concurred with Muradzikwa saying: “We seem to be in a difficult situation, and I don’t see any easy way out.”

 

Williefaston Chibaya, the president of the Zimbabwe Pension Funds Association said the situation was dire.

 

According to him, obtaining granular data was difficult as certain information was  not captured  t the time.

 

“I think some of the issues with the data goes back to 2 000. It’s critical that we are given more time to deal with the problem of data,” Chibaya said.

 

David Mnangagwa, the deputy minister of finance, economic development, and investment promotion, believes that the problem has dragged on for too long and that a speedy resolution is required.

 

“We need to close this (compensation) matter. We cannot spend seven years after the Smith-led Commission report to conclude the matter.”

 

The Actuarial Society of Zimbabwe president, Prosper Matiashe,  weighed in saying: “It’s a huge problem. Relevant data has not been captured as most of the data is in hard copies.”

 

Amanda Sibanda, an insurance  expert, told Business Times that policyholders and insurance companies are equally impacted by poor data integrity.

 

“Without accurate record- keeping, there could be a variety of consequences ranging from a pension fund failing to meet its legal requirement to harming their ability to check if sponsoring employers are paying the correct contributions for their employees,” Sibanda said.

She added: “Poor data integrity could also result in policyholders not receiving the pensions they are entitled to.”

Clemence Chiduwa, the chairman of the Parliamentary Portfolio Committee on Budget, Finance and Economic Development also expressed disquiet over poor data integrity.

 

“What I don’t understand is that when the industry is they don’t have data, was there a fire or what? Chiduwa asked.

He continued: “As a committee we are worried. We are going to ask IPEC to appear before the committee as we need to instil confidence in the market. We need granular data to be in place and the separation of assets as well.”

 

In order to wait for the resolution of the pre-2009 compensation to members who lost value when the government abandoned the Zimbabwe dollar in 2009 owing to inflationary pressures, IPEC has now stopped  pension funds that  wanted to be dissolved this year.

 

Poor record keeping  by pension funds themselves or outdated records has also resulted  in vital multi-million pension benefits gone unclaimed at the country’s pension funds.

The pension funds find it challenging to track down the members due to poor record keeping.

 

“This is quite a challenge and worrisome because people get to retirement age and they don’t claim their benefits,” an insurance expert, Michael Dube told Business Times.

This means the affected pensioners could be living in poverty, yet they have money that they have not claimed from their pension funds for years.

In light of all of this, IPEC stated that it was critical for businesses to inform their staff members that they are entitled to pensions upon retirement from their jobs or contribution refunds in the event that they leave before attaining retirement age.
According to IPEC, pension funds must also keep up-to-date membership information and contact details for each member to facilitate simple tracking.
According to Muradzikwa, the insurance and pensions regulator has also released updated financial reporting standards for pension funds along with additional disclosure mandates with the goal of improving information accessibility for different stakeholders.

 

“The Commission also issued a guideline on record keeping standards, which prescribes data retention period.

 

“For example, membership/policyholder data will be retained for the greater of 15 years after the full benefits are paid out, 100 years from the member/policyholder’s date of birth, 100 years from the date of birth of any beneficiary who received benefits, and 15years after the member/policyholder’s death,” Muradzikwa said.

She added: “The same Guideline also makes it mandatory for pension funds to have their data audited every year. Following the gazetting of the new Pension and Provident Funds Act [Chapter 24:32] in September 2022, the Commission has drafted new regulations, which have enhanced provisions on data preservation and maintenance.

The insurance industry has also come under the spotlight for lack of investment in robust information technology (IT) systems, which a critical  in risk mitigation.

At a time when global insurance players have moved from legacy systems to the newest and most complex systems that offer advanced analytics, telematics, and smart contracts, among other features, the majority of insurers in Zimbabwe have continued to be the biggest users of old insurance systems.

The Insurance and Pensions Commission’s (IPEC) director of insurance, Sibongile Siwela, stated that the absence of robust IT systems in the insurance sector meant that Zimbabwe’s insurance market was not prepared for a shock.

She said insurance companies should make aggressive plans related to robust IT systems, a development which would also help with analytics that would allow for efficiency, mitigate risks and rapid sharing of information.

 

“The digital revolution is disrupting the business environment, and the insurance industry is no exception.

But, of serious concern is that there is a lack of a robust IT system in Zimbabwe’s insurance industry,” she said.

Global insurance players who have invested in robust IT systems, which have overtaken traditional or outdated systems, are bringing value because the insights or interactions are bringing those insurance companies and their commercial customers closer through technology.

However, Anxious Mpofu, an IT executive in the insurance industry, stated that it was costly to import robust IT systems and suggested that industry players come  together to purchase and share the technology.

“The cost is too heavy for local insurance players.

For example, my company has been quoted US$83,000 annually for the latest and robust software,” Mpofu said.

 

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