The Procurement Regulatory Authority of Zimbabwe (PRAZ) has directed the Ministry of Health and Child Care to follow the law after it excluded brokers from bidding to provide insurance services, it emerged this week.
The directive came after the Insurance Brokers Association of Zimbabwe (IBAZ) approached PRAZ on the exclusion after the ministry changed goalposts on a tender to provide insurance cover for motor vehicles, motorcycles and ICT equipment. The tender closed last month.
In written responses, PRAZ acting chief executive officer Clever Ruswa said the authority had received a complaint from IBAZ and engaged the procuring entity (PE) to provide an explanation on the matter.
“The procuring entity provided its explanation and the Authority directed the PE in terms of section 7 of the Public Procurement and Disposal of Public Assets Act [Chapter 22:23] to align the requirements with the provisions of the law,” Ruswa said.
Industry executives said PRAZ’s directive means a re-tender which would remove the exclusionary clauses. They said the exclusion of the brokers and a clause that the bidder must submit confirmation of credit rating by a ratings agency “stink to high heaven” and it was tailor-made to suit a local short term insurer (name supplied).
In February, the Ministry of Health published a notice in which it was looking for insurance players to provide cover for motor vehicles, motorcycles and ICT equipment.
The procurement notice stipulated that interested bidders must be registered for a period of not less than one year, must have a certificate of incorporation, must have a vendor number, must be registered with PRAZ and attach proof, must have a valid tax clearance and must have VAT certificate.
Brokers were shocked when they saw a clause in the bid document which said bidders should be underwriters or insurers and brokers or intermediaries would not be considered.
The exclusion of brokers from the tender drew the ire of the constituency which approached PRAZ to intervene.
In a February 12, 2021 letter to Ruswa, IBAZ said brokers had been excluded as has become the norm where government departments deliberately exclude brokers when it comes to insurance tenders as discussed during the PRAZ/IPEC workshop of August 18, 2020.
IBAZ said one such instance of exclusion was the tender in which they have incorporated a clause which reads ‘Bidders should be underwriters or insurers. Brokers or intermediaries will not be considered for this tender’.
“As advised by your office, we are to report such practices as they violate the principle of fair competition. We therefore present this case as one of the many cases where government departments are not being fair to us despite the fact that we are professionals in this field and play a very crucial role in the whole insurance value chain,” IBAZ wrote.
“We have had situations like these before, where after all the tender process is finalised, we discover that a big portfolio such as this one would have been awarded to an independent agent to handle at the expense of qualified professionals in this field. One then wonders whether there is some degree of professionalism in this whole issue.”
Ruswa replied in a March 5, 2021 letter that: “The Authority is currently engaging the procurement entity to seek clarity on the restriction, and will revert to you after considering the procurement entity’s submission to the Authority.”
When PRAZ did not revert to the brokers, IBAZ approached Health and Child Care permanent secretary Jasper Chimedza seeking clarification on the exclusion of the industry in the tender despite being registered entities under the IPEC Act, Companies Act and PRAZ under category Insurance and Brokerage Services (S1006) and eligible to participate in public procurement.
“Our main worry is to understand if there could be valid reasons warranting the exclusion so that in future corrective and mutual engagements can be done for the benefit of both parties and the general insurance consuming public,” IBAZ wrote.
However, the Ministry did not respond.
Efforts to get comment from the Ministry of Health were fruitless. The Ministry’s spokesperson Donald Mujiri requested questions in writing but had not responded at the time of going to print.
There were 32 registered insurance brokers as at December 31. Last year, premium income by insurance brokers increased by 147% toZWL$1.3bn in real terms from ZW$540m in 2019.
Seven out of the 32 registered insurance brokers submitted United States dollar returns as required by Circular Number 15 of 2020, which provides for the submission of information on Foreign Currency Denominated Business by registered Insurance Entities. The Insurance and Pensions Commission is currently undertaking regulatory action against brokers who did not submit the required returns.