Insurance sector struggles amid economic turbulence, market shifts

STAFF WRITER

Zimbabwe’s insurance industry is facing mounting economic and structural challenges that have severely weakened its penetration rate over the years.

Once peaking at 5.7% in 2004, the sector has since suffered a dramatic decline, falling to between 1.5% and 2.6%. A combination of currency instability, limited investment opportunities, a shrinking formal economy, and rising unemployment has left insurers struggling to maintain growth and consumer trust.

One of the biggest obstacles for the industry is the reluctance of individuals to take up new policies. Economic hardships have significantly reduced disposable incomes, making insurance an afterthought for many Zimbabweans. Policy lapses have surged in recent years, reflecting not just financial strain but also diminishing confidence in the industry.

Many policyholders are wary of the long-term value of their insurance products, particularly due to uncertainties over payouts and market stability.

Currency volatility remains a major concern. Frequent shifts between the Zimbabwean dollar and other currencies have eroded the value of insurance payouts, leaving policyholders uncertain about the real worth of their coverage. In a climate of unpredictable inflation, insurers struggle to price policies accurately, while consumers hesitate to commit to long-term contracts. The situation is further complicated by limited investment opportunities. A weak capital market and an underperforming stock exchange have hindered insurers’ ability to grow premiums through profitable investments, restricting their capacity to offer competitive and sustainable insurance products.

The structure of Zimbabwe’s labour market presents another major hurdle. With an estimated 60% of the country’s GDP generated by the informal sector, a large portion of the population lacks access to structured financial products. Unlike formal employees, who often receive insurance through employer-sponsored schemes, informal workers typically do not have the same financial security or access to insurance coverage.

At the same time, the country’s shrinking industrial base has further contributed to declining insurance penetration.

Fewer formal businesses mean fewer employer-backed insurance plans, while high retrenchment rates and persistent unemployment continue to reduce the number of potential policyholders.

Speaking at an engagement workshop in Harare last Friday, Mavukeni Rufai, Secretary General of the Life Offices Association of Zimbabwe, outlined some of the key challenges facing the industry.

“The industry is facing several major challenges, including low new business. Many people are unwilling to buy new policies or take life insurance,” he said.

He explained that frequent currency changes make it difficult to maintain the value of insurance payouts, creating further uncertainty among policyholders.

“There is also a lack of stable investment opportunities, which restricts industry growth,” he said. “More people are working in the informal sector, making it difficult to offer traditional insurance policies. Apart from that, there is a shrinking industrial base. Fewer formal businesses mean fewer employer-sponsored insurance plans. Unemployment reduces disposable income, affecting insurance uptake. The stock market is not robust enough to support long-term insurance investments.”

Despite these challenges, there are opportunities for the sector to adapt and grow. One potential solution is the development of micro-insurance products tailored to the informal sector. By designing affordable and flexible policies, insurers can tap into a largely underserved market and expand coverage beyond the traditional customer base.

Digitalization also presents a significant opportunity. With Zimbabwe’s internet penetration at 59% as of 2020, mobile-based insurance solutions could help insurers reach younger demographics and offer more convenient access to coverage. Mobile money platforms are already being integrated into insurance services, making it easier for customers to pay premiums, renew policies, and process claims remotely.

However, for these initiatives to succeed, the industry must address a longstanding trust deficit. Many Zimbabweans remain skeptical about insurance due to past experiences with policy devaluation, delayed payouts, and unclear contract terms. Strengthening consumer education will be essential in reversing this trend. By improving transparency and clearly communicating the benefits of coverage, insurers can rebuild confidence and demonstrate the long-term value of insurance.

Regulatory reforms will also play a critical role in stabilising the industry. Policymakers and regulators must collaborate with insurers to develop frameworks that protect policyholders while fostering sustainable industry growth. Measures such as enforcing capital adequacy requirements, ensuring fair claims settlements, and promoting risk-based pricing could help create a more resilient insurance market.

Collaboration between insurers, banks, and fintech companies could further accelerate industry modernisation. Bancassurance—where banks partner with insurers to distribute policies—has proven effective in other markets and could provide a much-needed boost to Zimbabwe’s insurance uptake. Additionally, embedding insurance into everyday transactions, such as mobile payments and e-commerce purchases, could encourage wider adoption.

Despite the significant challenges facing Zimbabwe’s insurance sector, the industry remains a crucial pillar of the country’s financial system.

With the right mix of innovation, regulatory support, and consumer engagement, insurers have an opportunity to turn the tide.

If the industry can adapt to evolving economic conditions while restoring trust among consumers, Zimbabwe’s insurance market could regain momentum and play a more significant role in strengthening financial security and economic resilience.