Insurance key in economic growth
over the years there have been arguments on whether insurance is still relevant to the Zimbabwean market and the role it plays in the growth of the economy.
The debates have been stemming from the fact that the insurance sector has been battling confidence issues dating back to 2009, with the sector still bleeding form the currency changes in 2019.
The loss of confidence in the sector has seen it struggling to grow with penetration rates remaining low.
But deliberations at the insurance institute of Zimbabwe (iiZ) annual conference in victoria falls last week have shown that insurance is the infrastructural pillar, which adds value in various dimensions to the economy but the growth of insurance companies cannot be achieved without strategic partnerships.
strategic alliances and integration have been noted as key and necessary ecosystems that are required to enable the insurance industry deliver value beyond insurance services.
strategic partnership refers to a contractual collaborative arrangement between two organisations to help them work together and achieve individual corporate goals.
Yeside oyetayo of rector College of insurance and Financial management in nigeria said most strategic partnerships in insurance facilitated market entry, risk and reward sharing, technology sharing and joint product development
she added that traditional models of insurance could not deliver on the scale of growth that the industry required to function effectively in the economy.
“The growth of the insurance companies cannot be achieved without strategic partnerships. insurers have to come to the realisation that inhouse efforts alone would not lead to their desired growth projections,” oyetayo said.
“some of the partnerships required include distribution, services, technology. However, technology is not a one-size-fits-all arrangement.
“Creating successful alliances or partnerships is not easy and there is no clear-cut approach to ensuring it is sustainable and valuable” she added. oyetayo said a partnership should strategically be focused on growth drivers and revenue optimisation strategies that are mutually beneficial to partners.
strategic alliances usually create new channels and drive innovation in products and processes - with academics, innovation hubs and insurtechs. in Zimbabwe, huge opportunities, especially in the agricultural sector to facilitate growth of the Zimbabwean insurance market have been discovered. However, insurance penetration remains low.
insurance penetration is the amount of insurance premium in a country expressed as a percentage of the gross domestic product (gdp), which is market value of all goods and services produced in a country at a particular time.
oyateyo said penetration was also an indicator of the level of development of the insurance sector in each country i.e., the higher the penetration rate, the more developed the insurance market. “(it) measures the growth of insurance premiums vis-a-vis the growth in the gdp. it provides insight into the contribution of the insurance sector to gdp. The country’s population was estimated at 15,1 million in 2021 (swissre sigma explorer) with about 67% residing in the rural areas and 33% in urban areas,” she said.
“The Zimbabwean business environment has been turbulent due to policy shifts and macroeconomic instability, characterised by exchange rate volatility and high inflation rates.”
The erosion of disposable income, coupled with uncertainty over the ability of the sector to cover claims against the impact of the pandemic, have resulted in a low appetite for insurance products, while back and forth changes of functional currency affected consumer confidence largely because of the loss in value for policyholders. But government believes the sector can do more. deputy director financial sector policy in the ministry of Finance matthew sangu on monday told delegates that the emergence of Covid-19 was a test applied to organisations.
He said it was with the same mindset that the industry should be resilient and keep up with accelerated trends.
“insurance, is all about risk management, as you cushion businesses and the general public who wait for a crisis to happen before they plan on how best to manage it,” sangu said.
“in the two days of this workshop, i challenge you to have fruitful deliberations to build your