LIVINGSTONE MARUFU
Zimbabwe’s insurance companies stand to lose approximately US$90m annually if the government goes ahead with its grand plan to to take over the third-party motor vehicle insurance scheme, prompting fears of imminent liquidation of some businesses, it has emerged.
Government plans to take over the third party insurance scheme next month.
Apparently, the administration is finalising new regulations to create a third party motor vehicle scheme under State control.
But, players in the sector told Business Times this week that the move might wipe out the insurance industry , as 32% of the sector’s earnings come from it.
Nicholas Sayi, the head of operations for the Insurance Council of Zimbabwe, warned that a significant number of insurance companies may close if the government follows through on its ambitious plan.
“We currently have a vehicle population of 1.5m in Zimbabwe and from that number we expect the 600 000 individuals owned cars to pay an average of US$50 per term to get around US$30m per term. On a yearly basis the amount will multiply to US$90m. This is the amount of revenue that our players will lose if the government takes over the third party scheme, ” Sayi said.
According to him, of the 1.5m vehicles on the road, 700 000 are owned by the government and Statutory owned and do not pay third-party insurance. Of the 800 000 remaining, 600 000 are compliant, with the other 200 000 either non-compliant or in debt.
“We tried to advise the government on the repercussions of such a move but they remained adamant. These issues need a wide range of consultations.
“We gave them a co-existence framework but our advice fell on deaf ears,” Sayi said.
The Parliamentary Portfolio Committee on Budget, Finance, and Economic Development chairperson, Clemence Chiduwa, stated that the idea is opposed by the committee because it will ruin the insurance industry.
“Government’s bid to take over third party motor vehicle insurance is not viable as eight companies which solely depend on this type of insurance will close and thousands of people will lose jobs.
” There has to be a plan on how to hand over the scheme to the government over a period of time to allow companies to diversify and survive.
“We advised against the move when the insurance players explained their issues in the Parliament but the government has made a move on taking over,” Chiduwa said.
The State-backed program, according to Felix Mhona, Minister of Transport and Infrastructure Development, will provide a wider range of benefits, such as paying for post-accident medical costs, financial compensation for injuries received in accidents, funeral grants in the event of an accident-related death, and reimbursement for lost wages as a result of injuries.
According to him, the administration is working on the details, which include enacting a statutory instrument (SI) that contains the policy outlining the operation of the program.
Citing difficulties the government was having in enforcing third-party liabilities, Professor Mthuli Ncube made it clear in his presentation of his 2024 National Budget last year that he intended to take control of the third party.
“Whilst insurance is an appropriate mechanism to cover liability costs, it has, however, proved difficult to enforce third-party liabilities since private insurers are profit-oriented and, hence, have no motivation to compensate for the losses incurred.
“In that regard, I propose that the government assumes third-party motor vehicle insurance to private and public motor vehicles, as is the case with other countries in the region,” Prof Ncube said.
