Insurance companies are reeling from the mayhem on the country's roads caused by reduced police presence amid revelations of a sharp increase in loss ratios of vehicles being mostly used as illegal taxis.
The loss ratio for vehicles popularly known as mushika-shika especially in Harare is now above 120% against a desirable average of less than 60%, the Insurance and Pensions Commission (IPEC) revealed on Friday.
Zimnat Insurance, a subsidiary of Masawara, last week announced that it had suspended comprehensive cover for certain vehicles mainy used by public transport operators.
The affected vehicles that include Honda Fit, Toyota Wish and Toyota Raum are popular with illegal taxi operators that have clogged roads in major cities since the police were forced to reduce their presence during former president Robert Mugabe's ouster in November last year.
Zimnat said comprehensive cover would only be available to customers after due diligence.
Acting Ipec commissioner Blessmore Kazengura told Standardbusiness that the lawlessness on the roads was hitting insurers hard.
"Yes, it has negatively affected the claims experience of the short-term insurance industry as evidenced by the increase in loss ratios of the vehicles being mostly used as illegal taxis or mushika-shika (pick and drop), which is predominantly above 120% against the desirable average of less than 60%," he said.
"What it essentially means, is that insurance companies are paying more than they are collecting as premiums leaving them in the negative and without a profit, yet they are running a business.
"This has the risk of resulting in some insurance companies closing shop if the loss ratio continues to be that high.
"Under such circumstances, insurers have to make a business decision that guarantees their survival.
"However, we urge them to find ways of monitoring the behaviour of their policyholders.
"We don't want to get to a situation where all insurance companies end up refusing to insure some types of vehicles.
"There must be fairness on both sides, i.e., insurance companies and policyholders."
Although other insurance companies said they may not follow the Zimnat route in dealing with the problem, there were a number of options being considered after being hit hard by the flouting of regulations by unlicensed drivers and unregistered as well as uninsured cars.
"We have not really taken that approach," said NicozDiamond MD Grace Muradzikwa, when asked how they were dealing with the challenges.
"All I am saying is that different companies respond differently to their loss experiences and I think that is how Zimnat has decided to respond to their loss experience.
"For us, we will also decide how we will respond but as of now we won't be taking that same position, not yet."
Last month, Muradzikwa told a local publication that the absence of police from the country's roads had left
"individuals, corporates and insurance companies "exposed to risks posed by unlicensed cars and unruly drivers."
She said there was also an upsurge in the number of uninsured and unregistered vehicles on the roads.
The Insurance Council of Zimbabwe (ICZ) said it would soon consult short term insurers to ascertain the impact of the problem.
"My take is that it is a new issue, which has not been taken through to the structures of the council, so at this stage it will be a bit of a folly on my part to proffer a comment," ICZ CEO Oliver Guni said on Friday.
Police were forced to play a peripheral role after the military temporarily took over government institutions, leading to Mugabe's ouster.
The police force, which was seen as sympathetic to the long time ruler was accused of fuelling corruption through numerous roadblocks across the country.
Kazengura said while driving behaviour falls under the ambit of law enforcement agents, lack of law and order impacted on insurers.
"It should be noted that when these motorists make endless claims because of the high risk they are exposed to, it depletes the insurance pool in the process exposing innocent policyholders when they make genuine claims," he said.
"Moreso, the use of vehicles insured for private use, for commercial purposes is discouraged because it may result in the insurance company increasing premiums for those types of vehicles or outright refusal to provide comprehensive cover for the same, as is the case with the insurance company in question."
He urged motorists to desist from insuring their vehicles as if they were for private use when in actual fact, they used them to carry fare-paying passengers.
"It is critical for motorists to fully disclose the use of the vehicle that they want to insure so that the insurance company can make an informed decision of whether to insure the vehicle or not and to charge an appropriate premium in the event that they choose the former," he said.
"An insurance company can also justifiably refuse to settle a claim when it establishes that the policyholder did not make full disclosure of the vehicle use, for instance, when they find out that the vehicle was being used for "mushika-shika"
Kazengura said IPEC had moved in to ensure motorists were cushioned in the face of the emerging problems.
"Our mission as the regulator is to supervise, regulate, develop the business and operation of insurance companies and pension funds for the protection of policyholders and pension scheme members," he said.
"To this end, we are taking measures to protect innocent policyholders who may be affected because of these unscrupulous motorists whose activities may affect the stability of the insurance industry in terms of the insurance pool for vehicles."
IPEC will carry out public awareness campaigns to educate the public about insurance products and what they cover as well as encouraging them to make full disclosure of vehicle use to help the insurance companies determine whether to insure or not as well as to charge the appropriate premiums.
"Through our consumer awareness campaigns, we are also discouraging the public from boarding vehicles that do not have passenger insurance, as is required by the law," Kazengura added.
"The commission is also engaging law enforcement agents to rein in on pirate taxis that operate without passenger insurance as it exposes passengers in the event of an accident."