Zim GDP rebasing affects insurance penetration

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THE Insurance and Pensions Commission (IPEC) says the recent rebasing of Zimbabwe’s Gross Domestic Product (GDP) has painted a different picture of insurance penetration in the country, which it says came down to 2,9 percent from 4,7 after the revision.
In October last year, Zimbabwe’s statistics agency rebased some of its economic statistics, in an unexpected move that increased the nominal size of the struggling economy by more than 40 percent to $22 billion.
The southern African country’s insurance penetration rate increased marginally from about 1,9 percent in 2010 to 4,7 percent in 2017.
IPEC, which has not completed tallying figures for 2018, says it expects that the ratio decreased last year.
“In 2018, we are projecting that the ratio fell to 2,9 percent largely due to the rebasing that was done in terms of the GDP for our economy,” Christopher Manunure, IPEC’s principal analyst said while making a presentation at the Zimbabwe Financial Inclusion Forum in Harare on Tuesday.
“Even at 4,7 percent, our penetration ratio was still very low compared to our regional counterparts such as South Africa where they have a penetration of 13,8 percent,” he said.
IPEC says the ideal penetration rate would be 20 percent.
Manunure said low confidence in the local insurance has been the biggest driver of the low insurance penetration.
“In 2008, we saw insurance and pension values being eroded to the extent that many Zimbabweans have lost confidence in insurance,” He said.
The hyperinflation that devastated the industry a decade ago has resurfaced after official inflation for January was reported at a post dollarisation high of 56,9 percent.
The technical threshold for hyperinflation is 50 percent.
For insurers and policy holders, these inflation developments have come as an unwelcome reminder of the hyperinflation in 2008 and 2009.
Insurers have started to sweat over a possible rerun of the events of 2008 and 2009.
Just two weeks ago, the Zimbabwe Association of Funeral Assurers approved a request by the industry players for a review of premiums.
Manunure said Zimbabwe’s insurance per capita, at $44 dollars for 2017, “is also quite small compared to an average of $54 for Africa”. South Africa’s per capita insurance is $842.
The only country from Africa in the top 10 for insurance penetration is South Africa. There are no countries from Africa in the top ten for insurance per capita.
Top on the list of IPEC’s focus areas for boosting penetration, is regulation reforms and encouraging micro-insurance.
“We believe that it is necessary for us to streamline our regulatory framework in order to for us to facilitate deep financial inclusion.
“Regarding micro-insurance, there are two statutory instruments that were gazetted in 2018 that will govern and monitor the operations of micro-insurance and we will continue to provide more room for micro-insurers to flourish,” Manunure said.
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