THE rebasing of Zimbabwe's gross domestic product (GDP) in 2018 will lower insurance penetration rate by 2,9%, an industry official has said.
Insurance and Pensions Commission (Ipec) acting commissioner Blessmore Kazengura on Tuesday told a financial inclusion workshop in Harare that excluding the National Social Security Authority (Nssa) and medical insurance, insurance penetration stood at 4,7% as of December 2017, a figure lower than that of southern Africa countries.
He said low confidence continues crippling the insurance sector after thousands lost their savings during the hyperinflation of 2008.
"This, coupled with current challenges affecting the economy, continues to impact on consumer confidence regarding insurance companies and insurance and pensions products. We believe that any amount that will go towards compensation will address the low confidence levels," he said.
The penetration rate is expected to reach 20% by 2020.
The penetration rate rose from low levels of 1,9 % in 2018 to 4,7% in 2017 as insurers leveraged on financial inclusion.
Government rebased the economy and subsequent changes of GDP, a move that saw numbers moving upwards from $16,6 billion to $20,5 billion.
Kazengura said the commission would continue to monitor capital levels of insurance companies to ensure that they have underwriting capacity, hence the ability to meet claims.
A number of insurance companies have been struggling to meet their capital requirements.
However, Finance minister Mthuli Ncube last year reviewed upwards the minimum prescribed asset thresholds for the insurance and pension industry which were introduced in 2010 in order to improve resource mobilisation to support key national projects.
The minimum prescribed asset thresholds for both short-term non-life insurers and reinsurers have been doubled from 5% to 10%.
Life assurers will be doubled from 7,5% to 15% while funeral assurers will increase from 7,5% to 10%.
The minimum prescribed asset threshold for pension funds was increased from 10% to 20% and they are all expected to comply by December 31 2019.
During the period, Kazengura said, distribution costs and admin costs remained high, resulting in high pricing of insurance products.
The registration of innovative insurers like Econet is expected to increase competition in the industry, and this is expected to drive down distribution costs and potentially lower prices of insurance products.