A bloodbath is beckoning in the insurance industry after the sector’s regulator gave players up to tomorrow to submit their compensation plans for lost value of their investments and policies when the country ditched its own currency for a multi-currency regime 10 years ago to tame runaway inflation, Business Times has learnt.
Confidence in the insurance sector reached rock bottom when policyholders were left counting their loses following the monetary policy shift which resulted in the redundancy of the Zimbabwe dollar. This prompted government to a Commission of Inquiry, to look into the conversion of values from Zimbabwe dollars to United States dollars for the period 1996 to 2014.
In 2012 the Insurance and Pension Commission (IPEC) hired a private firm called Acumen Actuaries and Consultants to undertake an investigation into the complaints brought forward by policyholders and pension scheme members.
But, the report was rejected after the industry challenged its findings and recommendations.
IPEC acting commissioner, Blessmore Kazengura, confirmed that government has taken a position that Zimbabweans need to be compensated and that an ultimatum of May 31 has been issued to insurance and pensions players to submit their compensation plans to the regulator.
He said there was no hiding place. The compensation of value lost will be done in United States dollars.
“Government has taken a position that there is need for the population to be compensated and we have written letters to individual (insurance and pensions) entities to submit their compensation plans by Friday next week (May 31,2019),” Kazengura told Business Times on the side-lines of a meeting on the findings of the Commission of Inquiry into the conversion of insurance and pension values from the Zimbabwe dollars to the United States dollars, held in the capital last Friday.
“So, there is no need for them (players) to continue fighting. So, the purpose of this meeting is to have everyone on the same wave-length as far as compensation is concerned.”
According to one of the former commissioners, Godfrey Kanyenze, amounts of “as low as US$0,08 were paid in lieu of education policies, endowment policies or retirement annuities” during the investigated period.
“Pensioners and policyholders had genuine concerns which have to be addressed in a holistic manner. The inquiry was evidence-based and its recommendations and findings are supported by evidential information. (We found out that pensioners were getting amounts that cannot sustain them in their twilight years and once-off pension benefits averaging betweenUS$20 and US$40. The benefits were not in line with their reasonable expectations,” Kanyenze said.
The value of the lump-sum pensions processed, Kanyenze said: “Were too low to purchase anything of value,” adding that:”Pre-dollarisation values were not accessible from banks due to cash withdrawal limits. On de-monetisation, many of the pensioners got only $5 as a lump-sum for the amount which could not be withdrawn from banks due to various challenges. We also found out that junior employees with shorter years of service got higher pension benefits compared to more senior employees with longer years of service, something which was common in both private and public institutions. There was lack of inflation indexation, which made the accumulation in ZWD very low in nominal terms.”
Kanyenze also said to worsen the situation, insurance companies and pension funds, failed to submit requested information, with most data submitted not comparable. He said in order to improve the amount of data, the Commission was forced to use its powers as provided in the Commission of Inquiry Act and subpoena board chairpersons, chief executive officers and principal officers.
He however most submissions from the chairpersons, CEOs and principal officers, still were not complete.
The Commission also found out that there were delays in the processing of lump-sum benefits, in some instances, took more than a year, something which resulted in beneficiaries getting payments with very low purchasing power.
Kanyenze said: “Some told us that they could not buy a bundle of vegetable, a goat or a pair of trousers when they got their money.”
“The public also expressed frustration over the onerous process of claiming survivor benefits, meaning they failed to access benefits, or could not access their survivors benefit entitlements. There was also loss arising from demutualisation of Old Mutual and First Mutual, which took place in 1999 and 2003 respectively. There was also poor record-keeping as most failed to account for individual pension fund members’ contribution records and investment returns.”
The commission blamed actuarial profession for failing to provide any guidance on the conversion process. This resulted in some using non-qualified actuaries, while others were converted by foreign and no-resident actuaries who had no appreciation of the local industry.
The commission also blamed the Public Accountants and Auditors Board (PAAB) and its member bodies such as the Institute of Chartered Accountants of Zimbabwe (ICAZ),who they said provided general guidance to help preparers of financial statements in the application of the principles of the International Financial reporting Standard in Zimbabwe for the financial year to December 31,2009.