8 December 2011
interview
BAOBAB Re Group Public Relations Officer Mike Chiurunga was elected president of the Insurance Institute of Harare (IIH) on November 24 this year. Chiurunga sees insurance ratios increasing in Zimbabwe next year. This week chief business reporter Paul Nyakazeya spoke to Chiurunga about the insurance sector, fake claims, dollarisation and trust levels.
What is expected of you as the new president for the Insurance Institute of Harare (IIH)?
One of the greatest expectations from the industry is to dress up the insurance sector in a wedding gown and make up its face. Confidence vanished during the “lost” decade but we need to recover and restore it. The success of the insurance sector will be premised on the overall image of the industry.
As president, I am expected to drive membership growth, both individual and corporate to the IIH. The insurance industry employs over 15 000 people, yet individual membership is extremely low, if not insignificant. The institute lost its charisma during the “lost” decade, yet it is a critical body in Zimbabwe’s insurance sector as Harare headquarters the majority of the insurance companies.
The new board will come up with initiatives to encourage team building and networking.
The average life assurance or pension fund investor feels robbed and done out of their savings. What role has your sector played in this erosion of value and loss of savings?
The erosion of value during the 2007 – 2008 era was a national challenge rather than an industry-exclusive or sector challenge, hence the insurance industry could not harness the corrosion of savings and financial assets values single-handedly. In fact the insurance industry is equally a victim than a victor.
Do you know that insurance companies also had their bank accounts levelled without exception? The Insurance sector is one of the major drivers of the stock market, yet their equity investments were equally distilled and vaporised. So the insurance industry is equally a victim than a victor.
In that vein, the need to restore value cannot be nailed on any one victim. The challenge really is on coming up with a harmonised currency conversion factor.
How have trust levels been among your clients and do you see your business and the sector recovering?
Trust levels are gradually increasing but at a slower pace. The challenge is on the disposable income levels.
Apart from the issue of trust, what else do you think clients are looking for in an insurance company?
We are now dealing with hard currency. Hard in the sense that it is not no longer easy to get it. Clients want efficient service delivery; they want to derive value for every penny spent. In fact, every expenditure is viewed as an investment, therefore it has to have a return. You will agree with me this is not only the case with the insurance industry but across the business sector.
The perception out there is that underwriters are quick to receive money from their clients but very slow to react when it comes to meeting their end of the bargain in times of need. The question is; what is the incentive of insuring, if one is not able to enjoy the benefits of the insurance?
Insurance is a business that hinges on trust. It is a contract of obligation, governed by set conditions and terms. You will appreciate that it is impossible to have a contract with open-ended terms. Obligation and fulfillment of the contract on either side is governed by the prescribed terms and conditions of the contract, which is a policy document and not assumption or perceived benefits.
The challenges are two-fold on the part of the insured. Either lack of knowledge and appreciation of the policy terms and conditions. Secondly, the lack of interest to read the policy document.
The policy document is the title deed for insurance parties which set the beacons through cover and exclusions. People are too lazy to read and ask questions pertaining to the insurer’s expectation covered in the insurance product they purchase until they suffer a loss at times. Many a time the insured only focuses on that they will recover in the event of a loss, blindly overlooking what they need to do in order to be compensated in the event of losses.
It is at the time of claiming that the insured cries foul when they are found offside to the policy conditions.
Contrary to insurers rushing to collect money, it is the insured who walk away poorly informed. Being a technical field, members of the public are encouraged to utilise services of insurance brokers and consultants who are able to speak the same language with the insurances.
Insurance companies have tended to rely on investment income with very little being recorded from underwriting income, is this likely to change this time around from what the industry has experienced after dollarisation.
An underwriting profit is the bedrock for the company’s investable surplus. The business itself has to be profitable. Investable surplus is a residue of underwriting profit.
An investment is the process of sweating the investable surplus. You are aware that the investment avenues are currently depressed. The equity market for instance as we speak is currently depressed and the returns are low. The only available short-term investment window is the money. Surely it will be a great miracle for a company with an underwriting deficit to make up with short-term investments. So pricing, volumes and claims and risk management are key.
How have been insurance penetration ratios in Zimbabwe compared to the region and what is your comment on that?
Insurance penetration ratios in Zimbabwe are currently low. That means buckets of opportunities are lying unexploitable, the challenge we have is not the size of the cake but the mouth.
As in most industries now, the magic is no longer on the margin but volumes. To be profitable, insurers must generate as much volumes of micro insurance as possible. This will lead to possible reductions in price and thus enhancing affordability of the products.
How has been the level of “fake” claims this year and how has it affected the industry and how are they being handled?
Fraudulent claims worldwide are a challenge to the industry. The good news is that structures have been put in place to deal with these “gold-diggers”. For your information faking claims is a criminal offence. We do not need to re-invent the wheel, the law takes its course. Industry anticipates that one in every four claims is fake. The industry is at full grips with offenders.
What is the insurance industry outlook like?
The future is bright for the industry. The mere fact that we have two foreign companies that have been licensed by our regulator, IPEC, is reflective of the future of the industry and its vast opportunities. We will see more products being introduced and insurance uptake will increase.
AllAfrica – All the Time