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PIA urges scrutinizing insurance products

THE Pensions and Insurance Authority has urged the public to always scrutinise and understand insurance products before buying.

And Insurance Association of Zambia president Christabel Banda says it is still disheartening that many people are exposed to financial risks that they could have been protected from using insurance

Acting registrar and chief executive officer Tresford Chiyavula said during a briefing for the launch of the 2020 insurance week under the theme, “creating a confident future with insurance” that the authority had several cases where policyholders buy insurance without understanding what exactly was being covered and end up getting disappointed.

“It is therefore important that we ask as many questions as possible before buying and also understand our rights and obligations as insurance policyholders,” he said.

Chiyavula said this year’s theme brings to the fore the importance of risk management and planning for the future especially in light of the COVID-19 pandemic which had affected the world in ways not imagined.

He said studies had shown that one of the main reasons why people do not take up insurance was lack of information on insurance.

Chiyavula said as indicated in the 2019 PIA annual report, the insurance industry in 2019 recorded an overall increase of 18 per cent in terms of Gross Written Premium (GWP) turnover.

“In quantum, the Gross Written Premium increased to K3.8 billion from K3.2 billion recorded in 2018. This resulted in an insurance penetration ratio of 2.63 per cent in 2019 as compared to 2.29 per cent in 2018. General insurance business increased by six per cent and grew from K1.9 billion in 2018 to K2.3 billion in 2019 with industry recording a 14 per cent increase in net claims. Long term insurance business also continued to grow and increased by 15 per cent to K1.5 billion in 2019 from K1.3 billion in 2018,” he said. “For 2020, notwithstanding the effects of the COVID-19 on the industry, the mid-year unaudited results are also showing some growth in the insurance industry. The combined industry GWP as at 30th June 2020 stood at K2.6 billion. General insurance stood at K1.7 billion while long term stood at K905 million. The impact of COVID-19 on the sector is yet to be fully appreciated. However, the authority has issued guidelines to industry to provide a framework for not only assessing the effect of COVID-19 on their businesses but also provide guidance on matters of treating customers fairly.”

He said the authority was also concerned with complaints from the public arising from delays in settlement of claims.

Chiyavula said insurance was there to settle claims and any insurance company that delays or avoids payment of claims was not fit to be on the market.

He said there was need to enhance public confidence in insurance.

Chiyavula said the authority was currently working on strengthening the regulatory framework for the industry to give policy holders the assurance that they were secure and that their claims would be paid promptly when they fall due.

He said all companies offering motor insurance, household or contents insurance, homeowners insurance, funeral and life insurance policies were now required to issue a copy of key facts statement to customers.

And Banda said the key objective of the week was sensitisation, showcasing the available products on the market and helping in enhancing financial skills among the general populace.

“The insurance week this year unfortunately is being held when as the country and the world at large is battling the novel coronavirus. The pandemic has changed the way we do business and affected our social lives. The week therefore has to be held under the new normal and so this places a limit on what activities will be able to carry out as industry players in accordance with the public health guidelines,” she said.

Banda said the insurance industry was a crucial component of the financial services sector, which helped to ensure sustainable economic growth.

She said insurance can help the country to improve livelihoods and secure future prosperity.

Banda said there were currently 30 insurance companies in the country with nine life insurance companies and 21 general insurance companies.

“We also have four reinsurance companies operating in Zambia. These companies provide direct and indirect employment through the many distribution channels used to market and sell insurance. They provide risk management services to companies and individuals, both standard products and microinsurance products, to meet a wide range of needs,” Banda said.

She said it was important for the consumers of the insurance service and the general public to be aware that premiums are monies pooled by insurers to make contractual pay-out when specified events occur or at an agreed time.

Banda said the general insurance companies paid out net claims of K516 million while the life assurance companies settled claims and benefits of K571 million.

“One of the major areas of concern, is the premium receivables for general insurance companies, where receivables recorded at the end of the year were K569.8 million representing an increase of 20 per cent when compared to 2018. Debt collection and the credit culture continue to be a challenge for the sector. The nature of insurance is that premium needs to be received in good time, so that it can be invested, to ensure that there can be timely settlement of all claims,” Banda said. “This increase in debtors in turn affects that ability of the insurance companies to fulfill their obligations to policy holders. It is therefore, imperative that consumers of the insurance service prioritise the payments of premiums so that they can enjoy the full benefits of having insurance.”

She noted that insurance companies had not been spared the economic impact of the COVID-19 pandemic.

“It is a delicate balance, seeking to continue economic activity while maintaining necessary measures to protect the health of our customers and our staff. We believe that adaptation is key, and as a nation, we will triumph over this pandemic. Insurance companies have supported and continue to support the fight against COVID-19, with various educational measures and material donations,” Banda said.

She said the industry was motivated with the fact that it was slowly beginning to see an increase in the uptake of insurance, with the penetration rate now standing at over 2.6 per cent.

Banda said it was still disheartening that many people are exposed to financial risks that they could have been protected from using insurance.

She said people often resort to borrowing in most cases at a high cost to cover a risk event, when insurance companies could have compensated them.

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