The Life Assurance Industry

4.1. This Unit gives an overview of the life assurance industry of Zimbabwe. The
Zimbabwean life assurance industry is comprised of 11 direct life assurance Companies
and 4 Composite Reinsurance Companies. The industry also has 1,481 registered agents.
The life assurance industry employs a number of actuaries in Zimbabwe.

Products offered in the market.

4.2. The following products are currently being underwritten by life assurers in Zimbabwe.

Risk Business

4.3. Funeral Plans these are plans which promise policyholders fixed sum assureds upon
death in exchange for premiums which can be payable under various options (annual
renewable, premium limited terms, or whole of life.) The sum assureds can be on an
indemnity basis i.e. the funeral costs will be met or on a cash basis. The sum assureds
under these policies are limited to a maximum cover of $6,000. The plans take whole life
nature, term assurance nature with some annual renewable nature. These plans are sold
both on an individual and group basis.

4.4. Group Life Assurance Business these are one-year term assurance products renewable
annually. Premiums are paid annually or monthly with benefits becoming payable on the
death of an insured member. The benefit paid out is usually a specified percentage of the
member’s salary subject to a free cover limit.

4.5. Term Assurance these are contracts which promise to pay a benefit on death of the life
insured within the term of the contract.

4.6. Whole life Plans these are contracts which promises to pay a death benefit of the life
insured whenever it may occur.

Annuities Business

4.7. Level Annuities these provide a fixed income benefit which is payable until death or end
of the guarantee period whichever occurs later. The policy may be bought on a joint life
status. Benefits may be reduced following the death of the main life. Guaranteed periods
are also available.

4.8. Growth Annuities are the same as level annuities except that the annuities are not fixed
in monetary terms but increase with time. The increase is not guaranteed.
Savings Business
4.9. Pension Fund Administration is either on an insured basis (deposit administration
funds/guaranteed funds) or segregated basis.

4.10. Deposit Administration Fund/ Guaranteed Funds these are investment portfolios
which are also non-linked but offer some pre-defined investment guarantees. The
investment vehicle invests pension fund money in properties, property company shares,
equities, various money market instruments and prescribed bonds.

4.11. Segregated Funds these are linked investment products managed to meet specific
investment needs of large pension schemes. The assets are registered in the pension
fund’s name. The insurance company makes its money through administration fees and
fund management fees.

4.12. Cash Accumulation Plans these are savings product whose proceeds are used to
purchase retirement pensions or to meet educational/holiday needs. Product proceeds are
linked to the value of the underlying investments. On pay-out, each policyholder receives
an accumulated fund account allocated to the policy. The accumulated fund account is
updated using the return declared by the actuary after each actuarial valuation.

Performance of the Life Assurance Sector

4.13. Zimbabwe’s Life Assurance sector is comparatively small registering revenue of
$400 million per annum according to the Second Quarter 2017 Life IPEC report. The
revenue is split as follows:
o Contributions from Pension Fund Administration 38%,

o Contributions from Annuities 4%,

o Premiums from Funeral Plans 36%,
o Premiums from Group Life Assurance business 15%,
o Premiums from Term Assurance 3%,
o Premiums from Whole Life Plans 3%,
o Premiums from Cash Accumulations is 1%.

4.14. Noteworthy is that the bulk (over 80%) of the contributions from Pension Fund
Administration are attributed to one player, whilst over 60% of the premiums from the
Funeral Cash Plan is from another single player. These trends affirm the fact that the
Zimbabwean life assurance sector is small and dominated by a few large players.

4.15. Funeral plans comprise the bulk of the individual life business being underwritten by life
assurers in Zimbabwe. The growth in funeral business has been driven by the weakened
demand for traditional life assurance products. Policyholders lost confidence in these
policies after their life assurance and pensions savings were eroded by hyperinflation and
subsequent dollarization. The low industrial capacity utilization, high unemployment
 and low disposable incomes have also contributed to reduced demand for traditional
policies.

4.16. Life assurers are also grappling with poor persistency as policyholders are lapsing
policies owing to the deteriorating economic situation in Zimbabwe since 2013. The
insurance penetration rate has remained relatively low at around 4% of the GDP as at
31 December 2016. The low penetration is reflective of the weak demand for financial
products stemming from low disposable incomes and deep distrust of financial
institutions. It is expected that entry of new micro-insurance companies will aid in the
improvement of the penetration ratio should the Micro-Insurance Bill be put into law.

4.17. Considering the current risk business being written it is not surprising that very little
business is being ceded to the four life reinsurers in the market. Reinsurers are currently
writing only about UD$4 million worth of premiums per annum with much of the
premiums emanating from Group Life Assurance Business.

4.18. From a pensions administration and management perspective, the deteriorating economic
growth and tight liquidity has led to most employers failing to remit outstanding
contributions to pensions funds. Most pension funds under the Deposit Administration
management remain in a paid-up status, which raises the question as to how these will
derive value to members given the generally high charges in the market emanating from
high costs of doing business in Zimbabwe.

4.19. The total assets under management of the Life Assurance Companies at 30 June 2017
amounted to USD$1.91 billion a growth of 139% from the $0.8 billion recorded at
dollarisation.

4.20. In terms of Statutory Instrument 24 of 2016, Life Insurance Companies are required to
hold 7.5% of the assets in Prescribed Assets. There is a one size fits all minimum capital
requirements of USD$2 million to demonstrate solvency.

4.21. The Life Offices Association of Zimbabwe (LOAZ) is the official representative of the
leading life insurance companies in Zimbabwe. LOAZ is a member of the Insurance
Institute of Zimbabwe (IIZ) which is a professional insurance organisation and
independent examining body whose core function is to promote efficiency and
improvement in business practice amongst its members as well as the delegates it trains.
It was officially launched in August 1982 as the Insurance Training and Education Board
of Zimbabwe.
4.22. IIZ offers professional qualifications which are certified in conjunction with the National
University of Science and Technology (NUST), in Bulawayo. Besides being an
examining body, the Institute facilitates short courses, workshops, seminars, and
conferences as part of continuing professional development (CPD) to the industry in
general.