BULAWAYO, June 15 (NewsDay Live) — Zimbabwe’s short-term insurance sector is losing millions of dollars annually as a widening mismatch between ZiG-denominated claim settlements and US dollar-priced vehicle repairs erodes profitability, an industry expert has warned.
Presenting at the Insurance Institute of Zimbabwe (IIZ) Winter School in Bulawayo recently, insurance practitioner Lovemore Madavo said the industry’s biggest threat had shifted from inflation to the interplay between currency volatility, time and operational inefficiencies.
“Zimbabwe’s biggest insurance risk is no longer inflation; it is the interaction between currency, time and operational discipline,” Madavo said.
He said many insurers continue to settle claims in ZiG while repairers source spare parts in US dollars, often using parallel market exchange rates, creating substantial financial leakages.
According to Madavo, a motor claim initially valued at ZWG100,000 can ultimately cost an insurer ZWG130,000 after a 30% exchange-rate distortion, translating into a ZWG30,000 loss on a single claim.
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“Currency mismatch is not theoretical; it is a direct, measurable profit drain on insurers and reinsurers,” he said.
Madavo estimated that an insurer processing 500 such claims annually could lose as much as ZWG15 million through exchange-rate-related leakages alone.
He said delays in claims processing were compounding the problem, with even modest inflation steadily eroding claim values over time.
“The insurer may not intend harm, but time and delay still create value erosion, customer frustration and relationship breakdown,” he said.
Madavo also flagged concerns over inflated repair quotations when insurance is involved, saying repair costs for insured vehicles can be up to 20% higher than those charged to uninsured motorists.
The developments underscore the operational challenges facing insurers in Zimbabwe’s multi-currency environment, raising questions over pricing models, claims management practices and the sustainability of underwriting profitability if currency risks remain unaddressed.