Insurance and Pensions Commission of Zimbabwe boss, Grace Muradzikwa

HARARE – Zimbabwe’s insurance industry could pay out millions of dollars to policyholders and members of pension schemes before their schemes mature if authorities agree to an Insurance and Pensions Commission (IPEC) proposal to have funds released before they are wiped out by a stubborn surge of inflation.

The plan, which is still under consideration at IPEC, has been precipitated by a fresh wave of volatilities in the past year that has seen year on year inflation inching close to 100 percent in May following a sharp rise in prices.

This has triggered fears that after losing a combined $3 billion in saving during 2007/2008 when inflation reached a record 500 billion percent, the dark days could be returning.

A bloodbath on savings may not go down well with the current generation of savers, who face the prospects of becoming destitute after working all their lives. But it is a tricky situation.

Analysts said government should consider the implication of immediate pay outs for insurance players, which have been affected by an erosion of value due to policy flip flops, as well as sharp drops in disposable incomes due to high unemployment levels.

However, President Emmerson Mnangagwa’s administration has been careful to take a confrontational stance against business under his ‘Zimbabwe is Open for Business’ campaign.

Other analysts said he could consider other options of preserving policyholder funds without pushing an already frail sector to the brink.

IPEC director for pensions, Josphat Kakwere said on Tuesday the regulator was concerned about the potential carnage on savers’ funds, which must be kept under watch.

“Why not give people access to their accumulated funds now and do what they want to do,” Kakwere said during a presentation at an insurance and pensions workshop.

“As IPEC, we are saying some people will be reckless but even if you give them at 65 years, they can still do it. We are simply saying there is a proposal. We will communicate accordingly,” he said.

Zimbabwe’s annual inflation reached 97,85 percent in May, from 75,86 percent in April, according to official statistics.

He called for fairness in the administration of savings.

“Revaluation surpluses pursuant to the currency reforms under defined benefit scheme funds should not be used to expunge actuarial deficits without enhancing the member benefits, in particular pensioners. Are the pensioners benefitting or they are being apportioned to shareholders? I know you guys have the interest of shareholders at heart. Is it not fair to have the policyholder participate in the abnormal profit? You must share with the person who helped you make the profits. We need to treat them fairly. They only way is to legislate because the industry will not do it. It is no longer business as usual because confidence has been eroded,” said Kakwere.

Policyholders lost more than $3 billion between 2009 and 2014, according to the Commission of Enquiry on Pensions and Insurance.