A MAJORITY of cars on Zimbabwe’s roads are under-insured, posing great danger to passengers and pedestrians around the country.
The revelation was made by t
he Insurance Council of Zimbabwe (ICZ) which also noted that the phenomenon was also widespread in the real estate sector.
Grace Muradzikwa, the insurance body’s head of media relations, told this paper that member companies had noted with concern a trend where property owners are “opting out” of ample insurance cover due to economic hardships, perceptions and lack of appreciation of the need for insurance.
According to the ICZ, comprising 22 short-term insurance companies, there are a lot of people in Zimbabwe with assets they cannot protect, yet under-insurance endangers the economy.
“As an insurance industry, we are having to deal with issues of under-insurance,” Muradzikwa told businessdigest.
“And when we apply average (a method of calculating compensation funds), we are (portrayed as) the bad guys or managers,” she said, adding it is up to Zimbabweans to understand the pitfalls of under-insurance.
Muradzikwa is also managing director of Zimbabwe Stock Exchange-listed Nicoz-Diamond Insurance.
Too often, insurance companies have been blamed for not meeting full claims yet policyholders are either reluctant to take market-based premiums or continually downgrade their cover — especially among motorists.
Despite the fact that Zimbabwe has one of the lowest premium rates — at 3% per annum against a regional average of 7% — a huge number of car owners are downgrading their insurance from comprehensive cover to third party.
Muradzikwa said a majority of people were taking full cover “as a token” of affluence and the trend was also widespread in the funeral and life sectors.
She said Zimbabweans ought to know that insurance policies such as third party cover for motorists had “limitations and categories”, thereby heightening risk and disappointment in case of accidents.
“Insurance is now being conducted on the basis of affordability and not replacement value. And when those (insured) assets are lost, people fail to replace them,” Muradzikwa said.
The NicozDiamond boss said such a scenario was symptomatic of under-insurance which is linked to three key issues:
*Of policyholders resisting correct insurance cover;
*Inflation-linked perceptions; and,
*Replacement cost outstripping market value of assets.
Said Muradzikwa: “People are saying we are coming from a hyperinflation scenario to a disinflation period, therefore, rates must decrease. You find, though, that the rate of increase (in inflation) has slowed, commodity prices are still up.”
With an industry growth rate and average of 50%, the industry is still exposed to the vagaries of inflation running at 144%, she added.
There are also fears within the ICZ that some clients, including big corporates, are understating their assets in order to evade insurance payments. — Staff Writer.