The Insurance and Pensions Commission (IPEC) has directed all insurance companies to seek approval from the regulator when offering new products into the market.
Munyaradzi Machinjika, acting head of the insurance and micro-insurance dept at IPEC said the move was to protect policyholders.
“We need to make sure that products being introduced into the market are fair and that insurance companies are able to honour claims when they fall due,” Machinjika told Business Times.
“This is to protect policyholders.
We saying to insurance companies, whenever you want to introduce a product, come to IPEC for approval. But, you should come with your actuaries, come with your price. “This is not a burden but a benefit to help strengthen individual insurance companies. It’s actually an issue of good practice in the sector,” added Machinjika.
Zimnat Life Assurance Company’s chief operating officer, Elizabeth Rabvukwa, also told Business Times on the sidelines of an insurance reporting mentorship programme for journalists which was held in the capital recently, that the move by the regulator was the best thing for the industry.
“Given where we are coming from, I think it’s important for the regulator (IPEC) to approve every product being introduced in the market,” Rabvukwa said.
“Probably, what the regulator needs to work on is the turnaround time of the approval of products. Otherwise it’s a good move by the regulator because we have seen some products being introduced in the market which don’t protect the policyholders,” she added.
Mavukeni Rufai, the secretary general of Life Assurance Association agreed with Rabvukwa.
“That’s the best practice and its international standard. I don’t know why IPEC had taken so long to implement this. What we want to see are products, which are in line with international standards,” Rufai said.
There are several insurance products in the market, including term life insurance, endowment insurance, permanent or whole life insurance and unit linked plans.
“Out of these products, only two are key,” Rabvukwa said.
“These are term life and permanent or whole life insurance,” she added.
With this product, the policyholder is covered for the entire life. It is understood that a lump sum is paid to the identified beneficiaries upon the death of the policyholder.
Rabvukwa highlighted that sum assured, in the case of term life insurance, is payable only in the event of death during the term. The contract only comes to an end at the end of the term and expires with no value.
“Term life insurance can be for period as long as 40 years and as short as one year,” Rabvukwa said adding: “(There is) no refund of premium and the premium is low as only death risk is covered.”
Endowment insurance products, which are investment oriented plans, are not that popular. They differ from term and whole life plans in that they pay a maturity benefit. With this product, for example, educational plan; a payout is made in death and survival.