INSURANCE DIRECTORS UNDER SCRUTINY:
THE Insurance and Pension Commission is working on new amendments which if approved would result in significant changes in some insurance company boards and management.
While the proposed amendments were not readily available, The Herald Business understands that IPEC is concerned about the calibre of some directors and managers running insurance companies, particularly their qualifications and social standing.
The commissioner of IPEC Mr Tendai Karonga said the proposed amendments were necessitated by changes in the insurance operating environment, technological changes and in response to some of the challenges we noted that the industry is facing.
“Currently, insurance companies are registered in terms of the Companies Act. However, there are areas that are peculiar to insurance, that we want to be addressed such as specific qualifications and attributes from board of directors, principal officers and management.
“We want to restore confidence in the insurance industry because we believe if we have people with certain qualifications who can manage the insurance industry in a professional and accountable manner, it will give confidence to existing and potential policy holders. We are currently developing these amendments for submission to our parent ministry — the Ministry of Finance and Economic Development,” he said.
Mr Karonga said specifics on the kind of qualifications that they were looking for will be disclosed in due course. The amendments he added were in addition to Statutory Instrument 59 of 2005 that provided for good insurance practice and corporate governance requirements.
In a related development IPEC has already come up with Risk Management and Corporate Governance guidelines, to deal with weaknesses in the ownership of the funeral assurance industry. Mr Karonga told delegates to the Zimbabwe Association of Funeral Assurers conference in Bulawayo this week that they expected full compliance with the guidelines by year-end.
“The funeral assurance industry is faced with a challenge whereby most assurers are owner managed. As a result of this scenario, there is no separation between management and control of the same insurers. This implies that decision made by the company maybe in favour of the shareholders and at the expense of policyholders in most cases.
This challenge manifests itself in the form of overbearing individuals within funeral assurance companies which is a rich breeding ground for siphoning off policyholder funds.
Such a scenario is exacerbated by the absence of key control functions such as Compliance, Risk Management/Actuarial and Internal Audit. In a bid to address these weaknesses, the Commission has come up with Risk Management and Corporate Governance guideline which we expect full compliance by 31 December, 2017,” he said.
Industry officials interviewed said the position taken by the regulator was long overdue and would benefit the industry.
“For a long time now we have had opportunists coming into the industry largely attracted by the large pool of funds they would manage from premiums and because such people are not insurers at heart we began hearing stories of abuse of funds.
“These are just individuals who are in it for the short term benefit they do not care what happens to their clients so this is a positive move which will separate the wheat from the chuff as it were,” said a senior official with one of the leading insurance companies. Another official said there was need for caution in the implementation process.
“While this is a good move there is need for caution in the implementation to ensure a smooth flow of operation in the companies that will be affected.”