Digitisation thwarts insurance leakages

Source: Digitisation thwarts insurance leakages | The Herald June 17, 2019

Tawanda Musarurwa Senior Business Reporter
The move by the Insurance Council of Zimbabwe to implement online insurance renewals has reduced leakages in the vehicle insurance sector.

The ICZ is an association of all short-term insurance and reinsurance operators who are registered and duly licensed by the Insurance and Pensions Commission (IPEC).

Prior to the implementation of the online insurance renewals, reports were emerging that the motor vehicle insurance landscape in Zimbabwe had been invaded by unscrupulous firms that only cover vehicles on paper. It was, however, not quite ascertained as to why this was happening.

To the extent that insurance firms under the ICZ banner switched from paper documents to information technology (IT) systems that covered the basic scope of insurers’ work, there has been a notable improvement in insurance firms’ efficiency.

ICZ engaged technology partner Southern Region Trading Co. to implement the online system.

SRT chief executive officer Phil Mushosho, said the introduction of the online insurance renewals has clogged gaps that were being exploited by some brokers with regards to motor vehicle insurance when the system was still manual.

Said Mr Mushosho: “We were approached by the Insurance Council of Zimbabwe, they were concerned about the leakages in terms of the third party cover notes because as long as you have a paper-based system you then open the door for counterfeiting.

“So a lot of insurance firms were losing money because brokers were creating fictitious cover note books, but we computerised that system to ensure that exploited areas like the manual system were integrated to the vehicle licensing.”

In Zimbabwe, motor third party insurance is the most common and basic type of motor insurance, which is issued in fulfilment of the Road Traffic Act Chapter 13.11. And most vehicle owners obtain third party cover simply for licensing purposes but it is a statutory cover that protects other parties and can be claimed against.

Mr Mushosho added that the online systems — which are integrated with those of the Zimbabwe National Roads Authority (Zinara), Traffic Safety Council of Zimbabwe and Zimbabwe Revenue Authority — had also had a positive impact on the accounts of these departments.

“As you know, the law requires that for one to license a vehicle one needs at least a third party insurance cover in place so what the Zinara vehicle licensing system does is that before they can issue you with the licence, the system automatically checks whether the vehicle has been insured.

“By doing that we managed to close a number of loopholes because not only were the insurance companies losing money because of counterfeit books, other Government departments like the Traffic Safety Council, Zimra and Zinara were also losing out,” he said.

In respect of motor vehicle insurance, the insurance industry collects and remits to Government the following statutory payments: stamp duty (5 percent of premium up to $100 000); Zimbabwe Traffic Safety Council (12,5 percent of Full Third Party Premium); Value Added Tax (15 percent of Brokerage Commission); Zinara Levy ($1 per transact or cover); IPEC Levy (2,5 percent of Net Premium Written for insurers and 2,5 percent of Gross Premium Written for reinsurers), and Externalisation Levy (2,5 percent of Gross Premium.

Official figures show that since system implementation in May 2016, stamp duty to Zimra to date amounts to $12,6 million; the Traffic Safety Council has received $8 million. Prior to this, the Traffic Safety Council was collecting around $200 000 a year.

Zinara has so far received $4,8 million. Previously Zinara was not receiving such a levy but the integrated system allows them to a levy of $1 per cover note.

STR director Laurence Sher says the online insurance renewals are of significant benefit to the motorists themselves.

“The development also protects the motorist, because while previously motorists were exposed to counterfeit cover notes and when they went to claim these notes would be disputed.

“Right now, everything is recorded in the system and no one can dispute the authenticity of the cover note,” he said.