Role and purpose of insurance
Our economy has suffered several shocks which has eroded not only people's savings but their confidence in the financial services ability to meet them at their time of need. We should
however look beyond the current crises and take lessons from other
countries that have experienced similar shocks and have managed to rebuild both their economies and their confidence in the Insurance and Pensions Sector. Examples include:
• the Great depression which started in 1929 and lasted until about 1939 and has been recorded as the worst economic downturn in history.
• Hyperinflation in Germany following World War1.
• Hyperinflation in Hungary which took place in 1946 following World War II. This is on record for being the worst in world history with process doubling every 15
hours at its peak.
The key learning point from these countries is that it is important not to focus on the failures but to learn from those failures to build something bigger and better. To quote the motivational guru Zig Ziglar “Getting knocked down in life is a given. Getting up and moving forward is a choice. You don't
lose if you get knocked down; you lose if you stay down. It does not matter how many times you get knocked down, but how many times you get up.” that is the true measure of success.
Zimbabwe is known for its resilience, having already survived the
2nd highest inflation rate in world history with prices doubling every 24 hours at the peak in 2008.What is Zimbabwe one may ask? Zimbabwe is its people and so it is important for each one of us to play a role in rebuilding the Insurance and Pensions Industry.
This Industry is a key sector of our economy as it not only provides us with security at an individual level, but our collective contributions into the various policies are necessary to kick start the economy as they are deployed to recapitalise companies, infrastructure development and provide support to other key productive sectors. A strong and healthy economy in turn means that people have healthy savings and improved standard of living.
It is a fact that life can be unpredictable in the best of times but
more so in a pandemic. What is certain though is that at some point we will die and leave loved ones behind- what is uncertain is the exact timing of this event. It is therefore important for us to have the comfort that when that day comes our loved ones will be able to meet the cost of not only the funeral but have enough to continue on with life with the same comforts they had before death paid them a visit.
Insurance is there to remove that uncertainty and ensuring that when death comes calling, your loved ones will be well looked after once you are gone.
Insurance protects against unplanned events. There can be surprises in life and some of them are unpleasant – why take chances. There is nothing worse than leaving the family in dire circumstances when one could have secured them at a small cost every year.
Insurance may be used for
1. Securing the children's future
It can be a great tool to ensure that one receives bulk amounts at predetermined times of their lives or their children's lives. For example, one knows there is an expense which they would have to incur for their child's higher studies, 15 years from now. Given our experiences from the past,
our investment philosophy for savings products is now skewed towards assets that provide some hedge against
inflation, that is private equity, listed equity, property and other infrastructure developments.
2.
If one does not lock-in money every year or every month - chances are that there would not be too much left when one's source of income dies down. That is when the medical expenses peak and one's source of income has dried. Plan for the retirement now and avoid
surprises in old age. Do not just keep hoping for the best! When it comes to retirement planning – what you put in is as important as the performance of the underlying asset.
Assuming Zero inflation, ask yourself if you can live on the amount, you are putting aside towards your pension every month? If not, then perhaps it is time to start thinking of
additional voluntary contributions towards your pension or investing in an asset that can generate additional
Retirement planning
income for you in retirement.
3.
What better feeling than knowing that one's family can do without them! Yes, not when one is still alive. But the very fact that your loved ones need not depend on anyone else in case of any unfortunate eventuality is a great feeling which then allows you to live life to the fullest.
While insurance products will be familiar to most, the beneficial effects of insurance on well-being are often only poorly understood.
Given the depreciation that we have seen on the ZWL in the past two years since its re-introduction it is important that we regularly review our covers in ZWL terms to ensure that, should the unexpected happen – the pay out on your insurance policy will be able to see your loved ones through that difficult time.
This is the basic purpose of insurance to relieve policy holders from the financial burden in the event the risk covered materializes. It helps one cope with hard times and always secures the financial state of an individual. Imagine having to worry about money matters along with the emotional turmoil that come when life sometimes throws us a curve!