‘New mortality tables to reflect Zim lifestyles’

PHILLIMON MHLANGA

The Insurance and Pensions Commission (IPEC) this week released new mortality tables to calculate how much people would have to pay in premiums when purchasing insurance policies, a first of its kind since the country’s independence in 1980.

Grace Muradzikwa, the IPEC commissioner, described the development as a significant milestone for Zimbabwe.

The southern African nation has been using tables produced in other countries, including South Africa and the UK. Previous attempts to create Zimbabwe-specific tables failed due to a lack of funding and support from stakeholders.

However, after receiving assistance from the Ministry of Finance and Economic Development, IPEC took the lead in developing new mortality tables tailored to Zimbabwe.

The insurance and pensions industry regulator roped in Life Offices Association, Actuarial Society of Zimbabwe, National Social Security Authority, Zimbabwe Association of Pension Funds, Zimbabwe Association of Funeral Assurers and the Macroeconomic and Financial Management Institute of Eastern and Southern Africa to assist in the development of the mortality tables.

Mortality tables, also referred to as actuarial tables or life tables, are statistical tables that display the likelihood that a person will live or pass away at a specific age.

They are used by insurance companies to calculate how much money must be set aside in case an insured event results in an insurance claim.

These are called reserves.

The investigation found, among other things, that mortality in Zimbabwe has improved.

For example, the number of deaths in Zimbabwe have decreased and the average life expectancy has increased.

Additionally, the new tables produced lower premiums and reserves than the standard tables from other countries.

Speaking to Business Times on the sidelines of a stakeholder meeting held in the capital Harare this week, Muradzikwa said the development marked a key milestone for Zimbabwe.

According to her, country specific mortality tables are ideal because they capture the country’s fundamental mortality experiences. Muradzikwa asserted that decisions will thus be based on more pertinent and appropriate experiences that reflect Zimbabwe’s economic and demographic trends.

Zimbabwe’s insurance and pensions industry was relying on mortality tables from other countries with some adjustments to suit local experiences.

The danger was that some inferences might not be correct, leading to poor strategic decisions such as charges for insurance and pension products.

“What it really means is for the first time in the history of the country we now have mortality tables which reflect Zimbabwean lifestyles.

“Previously, we were using UK tables, South African tables. And a lot has changed. They have been involved in changes in their lifestyles and the standards of living. The findings show that our mortality is actually a lot lighter than it was before.

So, we were actually overstating it. This (development of the country specific mortality tables) is really a significant milestone,” Muradzikwa told Business Times.

She said using tables from other countries has its own challenges which includes the mortality experiences in other countries are less likely to be a true reflection of Zimbabwe’s experiences due to differences in economic, social, and demographic situations.

This is notwithstanding expert judgement that can be applied to such tables to reflect local mortality experiences, Muradzikwa said.

“The other challenge is mortality changes over time due to new lifestyles, working habits, and medical advancements. These changes are broadly country-specific, which makes it difficult to adopt the experiences of other countries.

“There is also a potential over/undercharging of insurance products, which may affect insurance uptake in the country.

(Also), over/under reserving for products may negatively affect the overall risk and solvency management for insurance companies and pension funds. Alive to these challenges, we took a bold decision to facilitate the development of our own tables primarily leveraging our local expertise and resources.”

An actuary for Beacon Actuarial Services, Pelagia Kafesu said: “The significance is that we have developed our mortality tables that can be used in insurance and pensions when doing pricing and valuations. So, each time when you do these you need mortality tables to apply.

Previously, we have been using tables from South Africa, UK ones and then we adjust. But, now we have our own that we can use. It reflects the mortality in Zimbabwe.”