HomeOpinion & AnalysisColumnistsGreedy actuaries cost pensioners dearly

Greedy actuaries cost pensioners dearly

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NewsDay has in the past run news items in which Industry minister Welshman Ncube was at odds with the general public over his views that only educated people be considered for leadership positions.

This was apparently a charge Prime Minister Morgan Tsvangirai had erred in some ways on account of his lack of education, presumably to the level of professorship.

In a bid to be labelled as educated and gain guaranteed entry into the job market, Zimbabweans have become so fixated on having some certificate. It is not uncommon to meet people in their middle to old ages enrolled in Masters of Business Administration programmes.

The fixation becomes desperate if the certificate is a mystified and revered one such as that of the actuary.

Human resources recruitment practices appear to have taken this view and put it into practice they care only about the qualification and the high-profile positions one has occupied in the past.

This view and hence recruitment practice have come with a high cost to competent delivery in all economic sectors in Zimbabwe. The failure by insurance companies to deliver pensions to the satisfaction of the general public can be tracked, to a significant extent, to the heavy reliance of the pensions and insurance sectors on four or five learned actuaries practising in Zimbabwe.

Actuaries are traditionally known to work out the level of (money) reserves that must be set up and be maintained to support long-term insurance and pension contracts maturity claims, eg from pensioners.

They make recommendations to insurance company management about the level at which pension fund members and insurance policyholders must contribute to have these reserves set up and in order for the two groups to receive benefits contractually stipulated on maturity.

Management on their part have to competently consider whether the recommendations are appropriate for their insurance and pensions contracts.

Actuaries in Zimbabwe have been accepted as those trained by actuarial institutions in the United Kingdom and the United States the governing Acts of Parliament of Zimbabwe still strangely make reference to these foreign institutions, as opposed to making reference to established practice standards.

It takes very long to qualify as an actuary with these institutions. Three or four Zimbabweans have done it in five years and under and left the country. Those actuaries practising in Zimbabwe each burnt the midnight candle for over five years, close to a decade, to get this highly-mystified and revered certificate.

There are still people burning this midnight candle in their 50s, having started more than 20 years back! just to get the certificate.

In a country where reverence is almost guaranteed for learnedness as evidenced by such certificates, the effort is worthwhile as jobs can be guaranteed.

In Zimbabwe, the insurance and pensions sectors have almost become blindly dependent on the few actuaries practising locally, given the tendency to wait for recommendations (in fact decisions) from these few actuaries many things in the sectors have been been left up to these actuaries.

The dependency is evident from the level of the regulator, to the low ranks of insurance management. Reliable information has it at least one of these actuaries sits on the board of the Insurance and Pensions Commission (IPEC) and they are chief executive of an insurance company, they run and/or control at least two actuarial consulting firms, they are chairman of the Actuarial Society of Zimbabwe, and they sit on a board that manages statistical information in Zimbabwe.

Taking into account the reverence that they have enjoyed, the temptation to be greedy and overstretch themselves beyond their competencies and beyond all principles of good corporate governance is evidently huge.

If the information about this or these actuaries and their activities in the sectors is correct, they essentially run the sectors, regulate and supervise themselves.

It is, therefore, no wonder these actuaries came up with the method to convert pension and insurance values from Zim dollar to US dollar, with the blind acceptance of insurance company management and IPEC. The values have caused so much public agony to the extent it remains an unresolved crisis.

The method which apparently .allocated assets, instead of simply adding member contribution accounts with an appropriate real rate of interest, did not make much public sense. Despite the widespread disgruntlement, at a national level, there has been no investigation.

It is, therefore, evidently not in the interest of these actuaries to have an investigation on a method that the public is not happy with and which method they implemented. It is also not unreasonable to conclude that they will use their powers in the IPEC board, the Actuarial Society and other bodies to manipulate decisions to their selfish ends, but prejudicial to pensioners.

It is clear that choosing people to positions purely on learnedness, misled the pension and insurance sectors to a crisis that still has to be resolved. This country urgently needs to avoid skills-training approaches that produce corrupt rent-seeking work ethics such as perpetrated by local actuaries.

The country needs to put in place training requirements that directly suit the needs of local economic sectors and it also needs to adopt recruitment practices that choose people on proven track records of solid delivery, with the certificates serving only as a first step in identifying candidates.

To be sure competent delivery is about producing results that are evidently useful to the public, not being a general manager for many years in failing institutions because of some certificate.

Martin Tarusenga is board member of Zimbabwe Pensions & Insurance Rights. Email, martin@zimpirt.com; telephone; +263 (0)4 883057; Mobile; +263 (0)772 889 716
Opinions expressed herein are those of the author and do not represent those of organisations the author represents.

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