Business / Companies
Zimbabwe insurance firms accused of robbing policy holders
29 Nov 2015 at 02:44hrs | Views
PENSION and insurance players in Zimbabwe are not maintaining accurate and comprehensive data which allows for precise calculation of pension and insurance funds and member benefit entitlements.
This raises questions on whether or not the on-going exercise by the Insurance and Pensions commission of inquiry will be useful.
President Robert Mugabe recently swore in an eight-member commission to probe the manner in which insurance contributions and pension benefits were converted when the country dollarised in 2009.
This follows concerns raised by policyholders and pensioners that they had been short-changed on their investments in the changeover period on the pretext that their contributions had been eroded by inflation.
Under its terms of reference, the commission will establish a compensation mechanism if it is found that pension fund members or insurance policyholders were materially prejudiced.
Pension funds also invested in the property and stock markets. However, these investment vehicles have been on a downward spiral since dollarisation and pension funds will not realise much value if they are to liquidate their positions.
However, in its position paper, Zimbabwe Pension and Insurance Rights Trust (Zimpirt) said service providers did not maintain accurate comprehensive data which would allow accurate calculation of pension and insurance funds and member benefit entitlements.
"Service providers, therefore, generally reneged on their fiduciary duty to maintain this data, for future reference," it said.
"We have also established that these prejudices were made possible by several failures in pension and insurance service provision, including in the following areas; regulatory failure, governance failures at all levels including at regulator and institutional levels, pension and insurance fund investment management failures," Zimpirt said.
"Failures in actuarial service provision and the effective management of other risks that pension and insurance funds are exposed to, failures in pension/insurance accounting and auditing," it added.
Zimpirt said as an organisation, they strongly urged the commission to look into such prejudices and failures as it had hinted.
The trust said service providers ignored the contractual documents underlying pension fund and insurance policy benefit entitlements, including pension fund rules and insurance policy documents; and invoked prejudicial arbitrary methods of entitling pension fund members and insurance policyholders.
"Service providers paid a wrong benefit type, typically forfeiting some of the members' rights in the pension arrangement, for example, paying a withdrawal benefit instead of a retirement benefit," reads the paper.
"Service providers ignored the real (US$) worth of contributions or premiums made into the pension arrangement over the membership period, by the member or policyholder and for the member by the sponsoring employer," it added.
Zimpirt said service providers reneged on assurances or promises that they made to the pension fund member or insurance policyholder regarding the minimum real rate of return that they would pay on maturity, and regarding the professionalism and competencies that they would use to realise these promises.
It said service providers paid arbitrary pension and insurance benefits and refused to substantiate how they arrived at the amounts.
"Service providers varied pension fund member and insurance policyholder contracts to worthless ones, unbeknown to the other parties to the contracts; and used the varied contracts to pay insignificant benefits," it added.
According to Zimpirt, transfer of pension fund member accounts from one administrator to the other tended to ignore original benefit terms and prejudiced pension fund members.
Economic analysts who spoke to Standardbusiness said the confidence in the pension funds was likely to be restored if the pension funds were to compensate pensioners who lost their contributions when the country dollarised in 2009.
"The commission's findings can be considered likely to declare that pension funds which had successfully invested the contributions received in buildings from which rental incomes are still being earned, should still accept an obligation to share this income with the people who made these contributions, if these people have reached pensionable age," economic analyst John Robertson said.
"If the pension funds accept this responsibility, some confidence will be restored in the pension funds."
Robertson said government should first establish that a flow of current income from past investments did exist.
"If it does, this should be compared to each fund's obligations, before and after adding the names of those whose contributions were not previously being recognised," he said.
Affirmative Action Group (AAG) vice-president Sam Ncube said it was sad to note that people who contributed to pensions funds were destitute.
"It's only those working for those companies that are benefiting," he said.
"They are living luxuriously but the pensioners themselves are living in squalid conditions. As AAG, we are saying the exercise was overdue. I know of some pensioners who are getting $10 a month yet CEOs of these pension funds are living luxuriously. We are saying no to that," he said.
Ncube said the problem was that people working for insurance companies were not answerable to anyone and they could do anything.
"We believe after the exercise the confidence is going to be restored in the pension sector," he said, adding that those who lost their monies should be compensated.
The plight of pensioners continues to worsen due to the unrelenting harsh economic situation prevailing in the country.
Retrenchments, reduction of salaries through revised work schedules, low and staggered salaries and wages, eroded pensions and delays in salary payments, have become the order of the day as companies battle to stay afloat.
This raises questions on whether or not the on-going exercise by the Insurance and Pensions commission of inquiry will be useful.
President Robert Mugabe recently swore in an eight-member commission to probe the manner in which insurance contributions and pension benefits were converted when the country dollarised in 2009.
This follows concerns raised by policyholders and pensioners that they had been short-changed on their investments in the changeover period on the pretext that their contributions had been eroded by inflation.
Under its terms of reference, the commission will establish a compensation mechanism if it is found that pension fund members or insurance policyholders were materially prejudiced.
Pension funds also invested in the property and stock markets. However, these investment vehicles have been on a downward spiral since dollarisation and pension funds will not realise much value if they are to liquidate their positions.
However, in its position paper, Zimbabwe Pension and Insurance Rights Trust (Zimpirt) said service providers did not maintain accurate comprehensive data which would allow accurate calculation of pension and insurance funds and member benefit entitlements.
"Service providers, therefore, generally reneged on their fiduciary duty to maintain this data, for future reference," it said.
"We have also established that these prejudices were made possible by several failures in pension and insurance service provision, including in the following areas; regulatory failure, governance failures at all levels including at regulator and institutional levels, pension and insurance fund investment management failures," Zimpirt said.
"Failures in actuarial service provision and the effective management of other risks that pension and insurance funds are exposed to, failures in pension/insurance accounting and auditing," it added.
Zimpirt said as an organisation, they strongly urged the commission to look into such prejudices and failures as it had hinted.
The trust said service providers ignored the contractual documents underlying pension fund and insurance policy benefit entitlements, including pension fund rules and insurance policy documents; and invoked prejudicial arbitrary methods of entitling pension fund members and insurance policyholders.
"Service providers paid a wrong benefit type, typically forfeiting some of the members' rights in the pension arrangement, for example, paying a withdrawal benefit instead of a retirement benefit," reads the paper.
"Service providers ignored the real (US$) worth of contributions or premiums made into the pension arrangement over the membership period, by the member or policyholder and for the member by the sponsoring employer," it added.
Zimpirt said service providers reneged on assurances or promises that they made to the pension fund member or insurance policyholder regarding the minimum real rate of return that they would pay on maturity, and regarding the professionalism and competencies that they would use to realise these promises.
It said service providers paid arbitrary pension and insurance benefits and refused to substantiate how they arrived at the amounts.
"Service providers varied pension fund member and insurance policyholder contracts to worthless ones, unbeknown to the other parties to the contracts; and used the varied contracts to pay insignificant benefits," it added.
According to Zimpirt, transfer of pension fund member accounts from one administrator to the other tended to ignore original benefit terms and prejudiced pension fund members.
Economic analysts who spoke to Standardbusiness said the confidence in the pension funds was likely to be restored if the pension funds were to compensate pensioners who lost their contributions when the country dollarised in 2009.
"The commission's findings can be considered likely to declare that pension funds which had successfully invested the contributions received in buildings from which rental incomes are still being earned, should still accept an obligation to share this income with the people who made these contributions, if these people have reached pensionable age," economic analyst John Robertson said.
"If the pension funds accept this responsibility, some confidence will be restored in the pension funds."
Robertson said government should first establish that a flow of current income from past investments did exist.
"If it does, this should be compared to each fund's obligations, before and after adding the names of those whose contributions were not previously being recognised," he said.
Affirmative Action Group (AAG) vice-president Sam Ncube said it was sad to note that people who contributed to pensions funds were destitute.
"It's only those working for those companies that are benefiting," he said.
"They are living luxuriously but the pensioners themselves are living in squalid conditions. As AAG, we are saying the exercise was overdue. I know of some pensioners who are getting $10 a month yet CEOs of these pension funds are living luxuriously. We are saying no to that," he said.
Ncube said the problem was that people working for insurance companies were not answerable to anyone and they could do anything.
"We believe after the exercise the confidence is going to be restored in the pension sector," he said, adding that those who lost their monies should be compensated.
The plight of pensioners continues to worsen due to the unrelenting harsh economic situation prevailing in the country.
Retrenchments, reduction of salaries through revised work schedules, low and staggered salaries and wages, eroded pensions and delays in salary payments, have become the order of the day as companies battle to stay afloat.
Source - the standard
