Insurance Bill: The poor Zimbabwean ndiye ari kumorwa naana Old Mutual, naana First Mutual Life

Insurance Bill: The poor Zimbabwean ndiye ari kumorwa naana Old Mutual, naana First Mutual Life
Harare East legislator Tendai Biti

HON. BITI: Thank you very much Madam Speaker for giving me the opportunity of debating on this important Bill, the Insurance Bill. I wish that these three Bills, one of them is an Act, the Insurance Bill that we are discussing today, the Pension and Provident Fund now an Act and the IPEC Bill that we just parked in Committee Stage. I wish that we have had an opportunity of synchronised debate by the National Assembly because there is interconnectivity between the three Bills.

Madam Speaker Ma’am, we have a crisis in the insurance and pension sector. That crisis in the insurance and pension sector came as a result of the loss of values, particularly in 2008, particularly the conversion of insurance assets that was done by the insurance houses unilaterally in March of 2009. The loss that pensioners have suffered, insured persons have suffered upon the conversion from the multicurrency regime to the Zimbabwean dollar, the de-dollarised status quo that was effected by SI 33 of 2019 on the 28th of February, 2019. 

We have a crisis of the loss of values. We have the crisis of an insurance industry that is undisciplined that is extractive, that is greedy. We know this as a statement of fact Madam Speaker, because of the findings of the Justice Smith Commission of Inquiry Report that was published in March 2017. That Commission of inquiry report is an indictment against the insurance industry. It accused and found against the insurance industry, particularly two houses, the Old Mutual and the First Mutual, rampant excessive aggrandisement, consumerism and conspicuous consumption. They live in Borrowdale in houses where engineering has said you cannot build a house but they will excavate. They drive Lamborghinis and other fancy cars parked at Sam Levy’s Village at the expense of insured individuals.

Thousands and thousands of insured workers have been pauperised by the insatiable greedy of insurance actors in the insurance sector. The question that then arises Madam Speaker, is that, does this Bill that we are considering address and deal with the mischief that is there in Zimbabwe? Does an insured person who lost his value or her value as a result of the shenanigans, the omissions and the commissions of these players have her question answered?

I submit Madam Speaker that her question is not answered. The mischief of the collapse of the insurance industry has not been answered in this particular sector. Hon. Nduna is here. He will tell you that there are over two million vehicles in Zimbabwe and of those, each one of them is obliged by operational flaw to pay compulsory third party insurance. Millions and millions of dollars of third party insurance are collected but the economy has nothing to show for it except expensive houses in Borrowdale, in Ward 18, represented by Hon. Rusty Markham. It is not good enough. So we need radical comprehensive transformative reform of our insurance sector. I want to propose the following: firstly, let us create structures of good governance inside the insurance sector. The current position of the law is that anyone cannot just own an insurance company but you are dealing with resources. It is not easy to own a bank. It should not be easy to own an insurance house.

So we must put a prudential governance criterion on both those who own these insurance companies and those who run them. If there are qualifications for lawyers and doctors, there must also be qualifications for the insurance professionals. Not every John Chibadura can just wake up and say I am now going to be the Chief Executive of ZIMNAT Assurance or Insurance; there must be qualifications. There must be a professional body that looks after the professionals that will run this sector because you cannot run an insurance from Borrowdale Brooke Golf Club or from Royal Harare Golf Club wamborova kadoti doti, warova bhora regold pa hole number nine wonobata mari dzevanhu. That should not be allowed. Governance issues must be dealt with. This Bill does not deal with that.

Secondly, the strong role of the regulator – the Justice Smith Commission of Enquiry Report found that 19% of the loss was due to a weak regulatory framework. I do not see a marriage, connection or intercourse between the IPEC Bill we parked a few minutes ago and this Bill. The insurance sector must give regular reports to the regulator. We do as lawyers. We give regular reports on the state of your trust account. You do not get a practicing certificate, unless you have met certain criteria approved by the Law Society of Zimbabwe. Insurance houses must meet the same criteria and must be given an annual licence if they meet those issues and the regulator must give them. We must hold them to high standards.

Third is the conduct of insurance. Insurance companies have been allowed to create wealth which should not have passed to the owners of policies. They have been allowed to form and hedge against inflation through the formation of property companies. The biggest player in this economy on the property market is the Old Mutual but there is a demarcation or durawall between pension assets and the holdings assets. First Mutual has got a holdings company which is very rich but the assurance company itself, First Mutual Assurance is a very poor company but the holding company was built by the sweat and labour of the pensioners or insured persons.

All assets made and created by pension insurance contributions must fall into the pot and the insurance person must benefit. This must have retrospective application. I represent a man called Rasmoss Pasipanodya who is coughing. He was a miner at ZIMPLATS and he developed a disease called pneumoconiosis, which is a disease of the lungs which comes if you go underground and you are affected. Old Mutual paid him RTGS$22 000 yet he was making contributions in USD from ZIMPLATS. Now, the Old Mutual says we cannot pay you, we are poor. That is why I have said and submit that there must be retrospective application of this law that says do not separate assets.

The same applies to the point Hon. Mushoriwa has made. If you look at the financials of Old Mutual, it has invested across sub-Saharan Africa. It makes more money in Zimbabwe in per capita terms other than any other country because we have been a dollarised economy. The real reason why it makes more money from Zimbabwe is because Zimbabwe is also a country where they make the least contributions to their insured people. That does not work. The poor Zimbabwean worker who is squeezed by inflation, ndiye ari kumorwa naana Old Mutual, naana First Mutual Life. PachiShona toti kura uone mwanangu, uri kungosvetwa chete. They say you cannot draw water from a stone but in Zimbabwe, the insurance industry is drawing water from rocks and we cannot allow that. That is why in this Bill, this is an opportunity of making sure that there is insurance justice in Zimbabwe, starting with Hon. Nduna’s favourite subject ‘compulsory third party road motor insurance to normal insurance to life insurance’-  so governance, regulation, asset management.

We must also put in this Act thresholds. We have done it in other Acts. I think it is the ZINARA Act where we said the expenses cannot be more than 2,5% of the income. For insurance companies, their overheads must meet a certain minimum threshold, say not more 3% because if we do not do that, they will buy mansions and go on holiday to Dubai at the expense, the blood and sweat of the poor working person who is struggling to buy a small pension for himself and his family. Let us have a threshold that your overheads do not exceed a certain threshold: governance and governance.

I now come to other issues. The Act gives too much excessive power to the Minister. If there is anyone who needs to be given excessive power, it is the regulator IPEC not the Minister. So the Minister should never be allowed as he is allowed to determine what companies and insurances, and what exemptions. Let us not give discretion. Law must be certain. The doctrine of legality demands that law must be certain, credible and legitimate. When you allow the Minister to play Russian roulette with what is an insurance company and what is not, it is no longer law. It is now arbitrage or extractive and that is why our country has not developed because I am going to corrupt the Minister and say I do not want after I have met him at the airport ndichingoti zvese zvakarongeka. Let us not give the Minister discretion; if we have to give anyone power, it should be the regulator because the regulator, through the Act which we just parked, we are trying to give the regulator teeth. We need to make a direct connection between this Act and the Pensions and Providence Fund. We do not do that and we will propose amendments.

There is a third thing which concerns me. The Act in Sections 80, 81 and 82, it says and speaks about married persons but the Act does not define what a marriage is. You have got a problem now because the normal definition of a marriage is a general law marriage which is now section 5.1 of the Marriages Act which used to be Chapter 5.11 marriage which used to be Chapter 37 marriage. So what it means now is that wives/women or partners in unregistered customary law unions are not recognised.  I am not making a case for the civil partnerships in Section 41.  I do not want to see those ones.  I am talking of those traditionally married and lobola paid for them but they did not wed.  This Act is deliberately quiet on that but it creates chaos.  Let us define what we mean by marriage.  Section 5:11, a customary law union but excluding your fancy civil partnership which I do not even want to see.  If we do not do that we have a problem.  That section is very shaky.  We need to protect women, widows and Madam Speaker, you know how widows suffer when the husband dies.  You know how our community is very patriarchal and why those women become third class or fourth class citizens.  What we have seen in movies like Neria is not a joke at all but is happening daily.  So, this Act must protect women and the institution of marriage, including the unregistered customary law union. 

          Then I come to the issue of currency.  The draft Bill says that a policy shall be in the currency of Zimbabwe.  It also says that the insurance company and the insured can agree on a currency.  We live in a currency that is very volatile.  In the last 20 years alone, we have used US dollars, Bearer cheques and now the RTGs dollar and so forth.  So, in a climate of currency volatility, it is very important that we preserve value by saying that the insurance policy must be honoured in the currency that it was being paid and that provision 2 must apply retrospectively.  What has happened is that insurance companies have made billions out of our currency fluctuations. Each time we move away from the US dollars, they have made millions and they will pay you RTGS dollars yet they were receiving contributions in US dollars.  We are tired of Old Mutual and First Mutual.  We must hold them to account and this is the space to hold them to account.  We must carefully craft that provision so that value is given and placed in currency. 

          The next issue I want to speak about is; in every other profession, if you commit an omission and a commission, the individual is held personally liable.  If you commit a commission and omission and you are an accountant, you are disbarred.; if you are a doctor, you are disbarred, if you are a lawyer you are disbarred.  But there are only two professions that get away with it.  If a banker commits a commission and omission, he can end up being a Minister.  The same thing applies to insurance companies.  We need to hold these professionals to account.  So, I propose that we impose personal liability because you are handling millions of people’s money.  If as a lawyer, I mishandle trust funds, I will be in the newspapers and disbarred.  The same applies to a doctor.  If he gives you prednisolone thinking it is a cough mixture, he will be disbarred.  So we need to revisit personal liability.

          THE HON DEPUTY SPEAKER:  Your time is up Hon. Biti.

          HON. NDUNA:  I move that he be allowed another five minutes.

          HON. MARKHAM:  I second Madam Speaker.

          HON. BITI:  Madam Speaker, another area of insurance banditry is their investments.  We must restrict the investments that they are allowed to make by law to quality none volatile activities.  You cannot take insurance money to go betting on the Zimbabwe Stock Exchange on share counters that you know will not yield any returns.  You cannot do that Madam Speaker and the point I am submitting is that the insurance sector has got a free hand in what they are allowed to invest as part of hedging their fund.  We must use this opportunity to ensure we regulate where they can put their money so that it is protected.  Part of the thing we need to do, which is why I said we need to marry this debate and the debate of the other Bills; we must also empower IPEC to make them disclose investments that they have made. 

There must also be thresholds; they are obliged to buy Government paper through prescribed asset ratios.  That is alright but we must put a threshold of the funds that they can put on the Zimbabwe Stock Exchange for instance.  I would submit that if they are to invest offshore, we must also put thresholds.  However, locally we need to be very careful and ensure that whatever they invest abroad is fungible to the extent that it can be remitted back to Zimbabwe.  The country of investment should be one we have some agreements on repatriation or extradition because if they can go to jurisdictions or havens which we cannot touch, they will be protected by their law.  So we need to make sure we put thresholds.

          In conclusion, I would like to submit that the Bill has come and it is premature but I think we should be given the opportunity of proposing major amendments at Committee Stage.  The Bill as it stands right now is very naked.  We must use the opportunity of the Committee stage to try and patch it up.  I thank you very much.