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Industry seeks pandemic-specific insurance cover

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ZIMBABWE’S industry has called on insurance firms to come up with special policies to cover potential disruptions to business as a result of unexpected risks.
BY MTHANDAZO NYONI
Currently, most insurers don’t cover losses caused by communicable diseases, epidemics or pandemics, but as pandemics keep recurring as seen through the outbreak of COVID-19, businesses now feel exposed.
“Insurance companies should innovate and tailor-make portfolios targeted at unforeseen crises like ravaging the pandemic,” Confederation of Zimbabwe Retailers president Denford Mutashu said.
“Just before the coronavirus hit, Zimbabwe experienced Cyclone Idai which led to loss of lives and irreparable damage to the environment, displacing thousands of people,” he said.
Coming up with tailor-made insurance cover for future pandemics will not be unique to Zimbabwe.
The United States Congress is considering legislation addressing business interruption insurance cover and public-private risk sharing initiatives in the context of both the COVID-19 pandemic and future pandemics.
These drafts are considered in the context of the current crisis through the Workplace Recovery Act and for future pandemics through the Pandemic Risk Insurance Act of 2020, the Business Interruption Insurance Coverage Act of 2020, and Never Again Small Business Protection Act of 2020.
Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo said though difficult, it was important for insurance companies to come up with products addressing future pandemics.
“This is probably more to the insurance companies to see what kind of product that they can come up with that would attract people to take up, to cover themselves. Probably, we will be having more and more of these (pandemics) in future,” he said.
“It will be a difficult call because normally what you want to cover yourself under insurance are things which you can foresee but a pandemic like this one is more like an act of God, which as companies we would not expect. But I think, obviously, depending on the insurance industry if they come up with a product that would cover for such eventualities, it may be attractive for some companies. We lost working hours with our employees away from work and in some instances companies lost employees,” he said.
Zimbabwe National Chamber of Commerce (ZNCC) deputy president Golden Muoni said the idea was noble and should be considered.
But he said insurance companies and the National Social Security Authority (NSSA) should support businesses currently reeling under the effects of COVID-19.
“They have got plenty of money which should be used to support businesses. That can be worked around through the bank to provide facilities because the biggest challenge in this economy is that we don’t have cheap money for production. Banks are charging exorbitant interest rates,” Muoni said.
“So if there is a model which can be worked around insurance companies to assist companies and also looking at NSSA, which has a lot of money, it means more people are employed and more people are covered by insurance companies,” he said.
“If that money is not used for resuscitating industries which are at a point of declining and suffering from COVID-19-induced problems, it means it is going to get worse as the number of employed people will remain small. The most affected will be the insurance companies because their base will be very narrow. So they need to come to the party,” he said.
Champions Insurance Company managing director Sten Maphosa they had started researching on how to cover future pandemics.
“This involves the use of actuarial (science) and to complicate it for Zimbabwe I don’t think there was any cover which was in place here for such business interruption. So what it means is we don’t have any pointers as to the potential loss,” he said.
“Before we decide on the premiums, we have to study the other side of the world where they are paying such claims so that at least we have a feel of the potential of possible loss to be expected.”
Maphosa said generally, insurance is about setting premiums based on historic figures.
While addressing journalists during the insurance and pensions mentorship programme held recently, Insurance Council of Zimbabwe executive officer Tendai Karonga acknowledged that corporates would seek to have policies that address business interruptions resulting from future pandemics.
Karonga said Zimbabwe’s insurance sector had not paid COVID-19-related claims because policies in force when the pandemic was declared did not cover such a risk.
In response to the call for the insurance sector to support local businesses, ICZ marketing and public relations manager Ringisai Batiya said investments channelled through prescribed assets and private investment channels are normally loaned out to stimulate production and consumption of goods and services.
“The short-term insurance in Zimbabwe has not been spared by the harsh macro-economic factors and in particular the monetary policies that have eroded reserves from which claims are paid,” she said.
“Investments from the industry have dwindled with most insurers failing to meet the prescribed assets requirements. At the moment the insurance companies are struggling just like most businesses in the country with limited funds for investments.”
She, however, said insurers were still able to stimulate production by providing security to business entities. South African insurers agreed to pay some business interruption claims despite the pandemic not being covered under clients’ policies.
COVID-19 has choked the life out of an economy that was already gasping for air, while exposing massive job losses and a further drop in capacity utilisation, according to a CZI report.
Manufacturing capacity utilisation is expected to drop to 37% by year-end while loss of employment is estimated at 25% in the formal sector and 75% in the informal sector by year-end, according to ZNCC.
A mini-survey conducted by CZI in March on the impact of the pandemic on local industry showed that 46% of local firms suffered disruptions in supply chains.
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