HARARE – A 423-page report by a Commission of Inquiry “Into the conversion of insurance and pension values from the Zimbabwe dollar to the United States dollar” in 2009 vindicates the old adage that says all that glitters is not gold.
Like snake oil salesmen, the generality of Zimbabweans had for years been made to believe that insurance and pension products were a sure firewall against the adversities of life but the period 1996 to 2014 blew the cover on this fallacy in damning detail by the Commission — chaired by retired Supreme Court judge, Justice George Smith — which debunks any pretence of hunky-dory in the industry. Writes author and motivational speaker, Noah Mangwarara.
It is often said that if you want to see the worst record in service provision, then look no further than the public sector.
The crisis period, 2000 to 2009, proved otherwise.
About 68 percent of the complaints submitted in writing gave a vote of no confidence in the private sector, with Old Mutual (33,9 percent) anchoring the list, followed by First Mutual Limited (FML) at 19,8 percent, Zimnat (19,3 percent), Fidelity Life (15 percent), ZB Life (11,6 percent) and Heritage Life (0,4 percent) — in that order — in the life assurers’ category.
Among funeral assurers, the most frequently cited culprits were Doves (58 percent), First Funeral (19,3 percent), Moonlight (12 percent), Foundation Mutual Society (10 percent) and Cell Funeral (0,7 percent).
In the public sector, pension agencies and the National Social Security Authority (Nssa) took the wooden spoon, constituting 23 percent of the complaints submitted to the Commission, followed by quasi-government institutions such as the Grain Marketing Board (GMB), the Local Authorities Pension Fund (LAPF), the National Railways of Zimbabwe (NRZ), the Unified Councils Pension Fund (UCPF) and power utility, Zesa Holdings.
During the course of the inquiry, it was noted that Heritage and Sunset Funeral Assurance were operating without board committees, thereby compromising the interests of policyholders.
Even more shockingly, the board chairperson of Sunset was not even aware whether the institution was still operational since the board had last met in 2011.
It was only after Sunset was subpoenaed to appear before the Commission that the board held its first meeting on August 20, 2016, chaired by the company’s chief executive officer.
The charade was quite widespread in the industry.
At Heritage, the board only met twice in 2009 and, at one of the two meetings, only one non-executive board member attended.
Instead of calling off the meeting on account of the absence of a quorum, the Heritage board proceeded regardless.
Vineyard Funeral had only one board committee, while Doves had two committees.
The Vineyard board met once in 2008 and, again, once in 2009.
At First Funeral Assurance, the board met twice in 2008 and only once in 2009.
It was also revealed to the Commission that despite religiously deducting pension contributions from their workers, some employers did not remit these to their pension funds, with arrears topping $328, 5 million as at December 2015.
Among the worst culprits were the Mining Industry Pension Fund, NRZ, the Zimbabwe United Passengers Company, the Cold Storage Company, Fidelity Printers Pension Fund and the UCPF.
To avoid a recurrence of this, the Commission has recommended legislative amendments to penalise defaulting employers.
During the course of the hearings, it was also heard that there was rampant and blatant conversion of schemes from defined benefit to contribution schemes without regulatory approval and without the consent of the employees.
Whereas in the legal field, the burden of proof lies in the plaintiff and not the accused, during the crisis period pension funds and insurance companies were so arrogant that they made it the policyholder or pensioner’s duty to prove that payment was made into their bank account.
In other words, where such payment was not received, “the burden of proof was imposed on the pensioner and policyholder to prove that they had not received the money.”
Insurance — just like banking — thrives on confidence, without which they won’t be any takers for its products.
Having said this, the burning issues the pension and insurance industries are struggling to overcome were primarily wrought on these sectors by the sudden and frightening loss of confidence which occurred between 1996 and 2014 when the majority of service providers selfishly reneged on their word in order to preserve shareholder value and employee interests during the hyperinflationary era.
In its report, the Commission revealed that its members were inundated with complaints during public hearings from holders of funeral policies who were let down by companies that unilaterally altered their contracts without their consent. Doves Funeral Assurance and Moonlight Funeral Assurance were cited among the culprits.
There were also rampant cases of conflict of interests involving directors and executives of both pension funds and insurance companies. The Commission cited cases where individuals with beneficial shareholdings in their insurance companies took up executive roles in their businesses, while at the same time serving on the industry’s regulatory board, the Insurance and Pension Commission (Ipec).
In certain instances, the same people were also found in industry associations, where they wielded enormous influence.
Whereas good corporate governance demands clear separation between shareholders, the board and management so that there is accountability and transparency beneficial to policyholders, some companies in the funeral assurance sector were found wanting as they disregarded this cardinal rule.
During the period covered by the inquiry, the Commission had harsh words for Moonlight and Ruvimbo Funeral Assurance for conflating these functions.
At Moonlight, all the shareholders in the business doubled up as members of the company’s main board as well as of its subsidiaries namely Marshfords Funeral Services, J. Davis Limited, Moonlight South Africa and Executive Funeral Services.
As if that was not enough, the same people also held executive positions in the company.
What this means is that apart from drawing their salaries from the business, they were also entitled to board fees, as directors, and dividends — in their capacity as shareholders.
This conflation not only exposes serious conflict of interest on their part, but it also removes the need for effective oversight of the business, along with its subsidiaries, which has the effect of prejudicing policyholders.
At Ruvimbo, one of the company’s major shareholders, Edward Gomba, was also an executive director of the company.
Between 2006 and 2009, the Reserve Bank of Zimbabwe (RBZ) knocked down 25 zeroes from the Zimbabwe dollar after it was ravaged by hyperinflation.
This saw the country earning the infamous reputation of recording the highest inflation in history, synonymous with countries that are deep in the throes of brutal wars.
Faced with rampaging inflation, not many companies were able to cope.
In 2010 alone, 70 insurance companies were closed down, in what the Commission blamed on poor management at both Ipec and at the regulated companies.
Few would also find it hard to believe that Zimbabwe only had two resident and qualified actuaries at dollarisation in 2009.
For a market whose asset base was valued at $3,69 billion in 2009, this was symptomatic of the startling loss of vital skills in the industry as many of the country’s actuaries turned their backs on their motherland in search of greener pastures in faraway lands.
Commissioners were also startled to find that despite the proliferation of civil rights groups in Zimbabwe, not even a single one of them had found the need to advocate for the rights of pensioners and policyholders.
This was the case until 2012, when civil rights groups started smelling the coffee.
But then, the damage had already been done.
The absence of such lobby groups had resulted in industry players doing as they pleased, thus prejudicing pensioners and policyholders of billions of dollars.
It also came as a rude awakening for the Commissioners to discover that it is not just in the realm of politics where parties ride roughshod over citizens’ rights by coaching their members to respond in a certain way during referendums and constitution-making processes, it afflicts private organisations also.
Many will recall that politicians fell over each other during the period 2000 and 2013 to influence their supporters on how they were to respond to questions posed during the constitution-making process.
Similarly, during their public hearings, the Commissioners were shocked to find that the Life Offices Association of Zimbabwe (LOAZ) had coached its members to respond to questions in a particular way, thus betraying spirited efforts on its part to manage industry contributions that went into the report.
Tellingly, renowned industry players namely Old Mutual, FML, Carmarton, Doves and Moonlight were rapped for providing input that was of little use to the Commission because of information gaps.
This was either deliberate, a result of poor data capture or both.
The Commission makes the point that “the people who attended the hearings were highly emotional, with some breaking down in tears as they shared their experiences. There was a lot of anger directed at the insurance and pension industry in general, a clear evidence of loss of confidence in the sector”.
Harrowing tales were heard.
After contributing towards a life policy with one of the leading life assurance companies in Zimbabwe, a pensioner told the Commission that he/she got the shock of his/her life when he/she received a cheque for US$0, 08 cents in 2014 as settlement for his life policy.
The amount was not even worth the effort to have the cheque deposited into the receiver’s bank account because its value could not cover bank charges, let alone the cost of transport and meals.
It was not just this unfortunate policyholder who got a slap in the face.
A number of policyholders were paid between $10 and $40 as final settlement in lieu of their education policies, endowment policies and retirement annuities which, to all intents and purposes, meant their contributions went down the drain.
Despite the blitz in publicity through the electronic and print media prior to their public hearings, only nine people pitched up for the Commission’s hearing in Matabeleland North on November 9, 2015 — a far cry from the 479 who thronged the venue of their meeting in Masvingo Province.
Upon inquiring about the reasons behind the poor turnout, it was revealed that the majority of pensioners resided in Hwange — the industrial hub for the region and home to Hwange Colliery Company Limited.
While the meeting proceeded regardless, the Commission had to convene another meeting in Hwange on January 16, 2016, where 82 people attended.
The other regions where attendance was poor included Mashonaland East (42), and Matabeleland South (84).
According to Nssa’s regulations, members or beneficiaries have a five-year limit to claim grants or pensions.
Those who fail to do so within the prescribed period, risk having their benefits forfeited.
As a result, many pensioners have lost their emoluments after missing the five-year deadline.
Many such regulations still expose workers to gross injustices.
For example, while regulations cap the normal retirement age at 60, and can be varied to 55 — for those engaged in strenuous work — it goes without saying that many employees are going on early retirement before reaching 55, some as early as in their 40s.
Sadly, many of them are dying before they could access their pensions, with the Zimbabwe National Government Pensioners Organisation revealing to the Commission that 50 percent of their members died before accessing their pension contributions.
It was, therefore, recommended to the Commission that the retirement annuity be disbursed at early retirement, “as opposed to waiting until the contributor reaches 55 or 60 years of age”.
As if to rub salt into the wound, many of those who were paid their lump-sum one-third annuities at the height of the hyperinflationary era environment could not immediately access their money because of the liquidity crunch which affected the financial sector at the time, and whose effects still reverberate across the banking industry today.
When they eventually accessed their annuities months later, they could only buy bundles of vegetables after their lifetime savings lost value due to rampant inflation.
On de-monitising the Zimbabwe dollar in 2015, pensioners who had been unable to access their money from the banks owing to a long-run cash crunch only received US$5 for the balances that were trapped in the banks “as their one-third pension lump-sum benefit payment”.
Philip Mataranyika and his team at Nyaradzo Group never cease to amaze.
Amid the stomach-churning dirt dug out by the commission of inquiry between 1996 and 2014, the only time readers of their report can see the proverbial light at the end of the tunnel was when this distinguished panel of commissioners mentioned the name Nyaradzo, whose literal translation is “comforter”.
This is what they commission had to say about Nyaradzo:
“The commission noted that there was not one complaint against Nyaradzo, one of the top funeral assurance companies that existed prior to dollarisation. There were no complaints relating to loss of value in relation to funeral assurers that were set up after dollarisation”.
Hats off to Nyaradzo for showing the way!
This could partly explain why Nyaradzo has within 17 years of its existence assumed the top brand status and is considered the second largest life assurer after Old Mutual.
In its final chapter, titled “Role and contribution of the insurance and pension industry in the financial services sector and the Zimbabwean economy, 1996 — 2014,” the commission makes the point that the emergence of rivals such as Nyaradzo might just be what the doctor has ordered.
It says competition was good for the industry as it brings down transaction costs; promotes innovation and diversifies the range of products and services on offer.
“The emergence of Nyaradzo, for instance, has brought in some much-needed competition to the doyens of the sector, such as Old Mutual that have dominated the industry for so long,” notes the commission.
“It is therefore important to promote further competition and diversity in the industry. Alternative forms of investment should be promoted beyond the traditional ones. More user-friendly and appropriate forms of insurance such as micro-insurance should be promoted to ensure that the sector reaches out to the poor and informal sector which has become dominant.”