Zvamaida Murwira-Senior Reporter
ZIMBABWE’s insurance and pension sectors will now be revolutionised after Parliament passed a law that punishes errant employers who do not remit pensions contributions of their employees.
The law will also come with a fund to compensate insurance policyholders and pensioners if they suffer losses from the collapse of the firms.
The Pension and Provident Fund Amendment Bill sailed through Parliament recently with aspects that seek to restore confidence in the sector.
The August House is also considering the Insurance Amendment Bill and the Insurance and Pensions Commission Amendment Bill.
The Insurance Amendment Bill will restrict insurance companies to providing one class of insurance between short term and life term.
On the other hand, the IPEC Amendment Bill empowers the regulatory body to fix minimum and maximum premiums of a given class of insurance cover in addition to creating a fund to protect policyholders should an insurance firm get insolvent.
The Pension and Provident Fund Amendment Bill, which now awaits Presidential assent before it becomes law, provides both criminal and civil penalties for errant employers who fail or neglect to remit employees’ contributions
Clause 17 of the Bill compels employers to remit pension contributions deducted from their employees within 14 days from the end of each month or face criminal charges and civil action.
Errant employers have in the past been accruing huge debts to pension funds by not remitting contributions, even though they deduct such from employees’ pay, and that has paralysed the financial operations of many funds.
The IPEC Amendment Bill establishes a Fund that will protect policyholders in the event that the insurance company goes under.
Clause 11 of the Bill stipulates that the fund will be administered by a Board of the Insurance and Commission, which is a body corporate capable of suing or can be sued.
“The fund shall consist of — all contributions from insurers registered in terms of the Insurance Act, contributions from pension, provident or retirement annuity funds registered in terms of the Pensions and Provident Funds Act, income from the investments of the Fund, penalties payable for contravention of this Part, and any money received by the Fund under any insurance effected on behalf of the Fund,” reads the Bill.
Finance and Economic Development Deputy Minister Clemence Chiduwa told Parliament that most of the reforms being made in the insurance and pension sector were a result of recommendations by a Commission of Inquiry into the conversions of insurance and pensions values.
He said the commission highlighted the need to review the legislation to strengthen the effectiveness of IPEC’s regulatory and monitoring mechanisms to protect policyholders.
Deputy Minister Chiduwa said the Insurance Amendment Bill provides that registered entities showing signs of distress should be placed under the administration of a curator.
“The Bill outlines the curator’s powers and duties. The Bill now allows the commission to apply to the High Court for winding up of any registered person with solvency issues who is unable to meet liabilities and continue with the insurance business.
“The Bill also confers the right to oppose any application by any other person,” said Deputy Minister Chiduwa.
He said IPEC will now prescribe minimum and maximum premiums payable in any class of policies.
“IPEC has experienced situations where a number of insurers charge inadequate premiums to meet claims and other obligations. Indeed, some Government bodies have found themselves doing business with an insurer charging uneconomic premiums only for that insurer to fail to honour its claims.
“The Bill will now allow IPEC to prescribe the payment of minimum premiums after consultations with industry associations,” Deputy Minister Chiduwa said.