Confusion rocks insurance sector as US$ policy holders risk losing value

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By Alois Vinga

CLIENTS who purchased policies using US dollars during the multi-currency system are set to lose their investment value as some insurance firms have moved to liquidate contracts into Zim-dollars using the prevailing interbank rates while other firms have not officially communicated the way forward.

A visit to several insurance providers by Business Tuesday showed that policy holders who had entered into contracts using foreign currency stood a great risk of being short-changed.

A client services official at Nyaradzo Funeral Services said that all funeral policies that were purchased in US$ will now be converted into local currency contracts.

“We are simply converting the amount that you paid using US dollars to an equivalent exchange rate as determined by the obtaining interbank rates,” she said.

A visit to the Commercial Bank of Zimbabwe showed a similar trend as officials manning the insurance desk said that all balances and benefits for agreements initially denominated in US$ will now be paid in local currency using the obtaining interbank rates.

However, a visit to First Funeral Assurance showed that the matter is being handled differently signifying confusion regarding the manner in which the issues are being handled as officials manning the relevant desks said that they were waiting for the Insurance and Pensions Commission (IPEC) to give direction on the matter.

CELLMED Health Medical Fund chief executive, Ish Makuzwa also said that there is no determination as yet on the matter as IPEC has not yet officially communicated.

The developments have been triggered by the introduction of Statutory Instrument 142 of 2019 which outlawed the use of multiple currencies after several companies had moved to reintroduce US$ products to shield their investments from inflationary pressures which had seen the Zim-dollar’s value eroding.

However, in line with the new policy, companies and individuals are no longer allowed to carry out local transactions using foreign currency.
Contacted for comment, IPEC public relations manager, Lloyd Gumbo said that no official position has been communicated on the matter.

“Following the enactment of SI 142 of 2019, the Insurance and Pensions Commission directed its regulated entities to suspend writing of new foreign currency-denominated business pending policy and regulatory guidance that will be issued after consultations with fiscal and monetary authorities.

“The Commission submitted implications of SI 142 of 2019 on the insurance and pensions industry to fiscal and monetary authorities and awaits feedback on the submitted recommendations,” he said.