Insurance brokers dream again

By Nelson Gahaza

Insurance Brokers are targeting to double their market share to 80 percent within the next two years on the back of anticipated increased economic activity.

The brokers, who are regulated by the Insurance and Pensions Commission (Ipec) and offer advice to prospective policy holders who want to buy an insurance policy or join a pension scheme, used to be a significant player in the insurance sector before confidence plummeted as a result of hyperinflation.

“Brokers used to control about 80 percent of the market in the 90s and early 2000 but now it is now around 40 to 45 percent.

We are looking to regain the market in the next two years as brokers and service providers are now developing products that suit the small businesses which are currently the mainstay of the economy,” Mapiye Chigorondondo, the Insurance Brokers Association of Zimbabwe (IBZ) spokesperson told The Financial Gazette.

He added that brokers usually deal with corporate companies but difficulties in the economy saw several companies closing, as a result impacting the role of brokers as individuals and small businesses go direct to insurance companies.

According to Chigorondondo, insurance is complex, and it is a product that one cannot just go and buy, but requires professional advice.

“Because insurance is not a product that is tangible, but a promise, hence if you are not too careful, you end up buying the wrong product and if something happens you find you are exposed and not covered,” he said.

He said there are a number of insurance companies in the sector and as a direct client, it consumes a lot of time to assess each company’s risk and balance sheet and determine one that is suitable for the product you need.

“Therefore, it is our job to scan the market for one. If you go direct, you may be charged more, but brokers have the negotiation power and companies tend to comply,” he said.

Brokers’ transactions represent the client more than the company. In some instances brokers collect premiums on behalf of the insurance companies and in some instances depending on agreements keep the premiums on behalf of the company only to remit at certain time periods.

Payments for the broker come from the company as commission and do not impact premiums.

According to Ipec’s 2017 third quarter report, insurance brokers earned $1,4 million during the quarter ended September 30, 2017, which translated to an 81,22 percent increase from $77 000 same period in 2016 and this was driven by a 10,01 percent increase in other income for the quarter.

During the period, there were 32 insurance brokers with only two namely Rainbow Insurance Brokers and Ambassador Insurance Brokers reporting capital positions that were below $100 000.

The brokers wrote $72,34 million in business and this was 2,67 percent higher than the $70,46 million reported for the comparative period in 2016.

The brokers recorded $11,95 million net brokerage commission since January 1, 2017 and this was a 0,55 percent increase from $11,88 million reported for the nine months ended September 30, 2016.

Early in the year, IBZ indicated that conditional selling of insurance being practiced by some banks goes against consumer rights to choice, as clients should be given an option to choose insurance brokers of their choice when they are being given loans.

The IBZ statement noted that there were certain attributes to identify when selecting a broker and professional advice on insurance matters hence should be left to IBZ members who are qualified in that field and have professional indemnity cover as a fallback position to clients in case of professional malpractice.

Chigorondondo said while this was not an attack on banc assurers, this was just to explain the role of the brokers after the regulator, Ipec warned the public against engaging  individuals and organisations purporting to be insurance or pensions experts as most of these people are not qualified and registered as financial advisers.

Ipec is mandated by law to protect the rights and interests of the policy holders and pension fund members and offers its services of them free of charge.

“Brokers and banc assurance have a good relationship. What we were saying is that brokers are trained, and have a fall back plan, but bank assurance might have an underwriter, but lacks professional advice in some instances.

Sometime you just have a desk, and got someone with a Certificate of Proficiency (COP) or one without manning the desk,” he said.

Insurance agents and banc assurance pose competition to the brokers and compete for the same market.

Meanwhile, Lloyd Gumbo, Ipec spokesperson said brokers also help companies that do not have a wider reach to access such markets, as a result playing a role in the drive for insurance penetration growth.

“Brokers duty is to represent people who want to buy a policy because they have the ability to choose and compare and advise the best service provider that suit one’s policy.

They also help companies that do not have wider reach as they can access some places where they cannot access.  For that reason they are able to help in improving the insurance penetration ratio,” he said.

Zimbabwe’s insurance penetration rate is currently around four percent with the regulator targeting to push the ratio to about 20 percent.

— The Financial Gazette.