IPEC orders insurance companies in Zimbabwe to process and settle claims promptly

TAKUDZWA HILLARY CHIWANZA 

HARARE – Zimbabwe's Insurance and Pensions Commission (IPEC) has issued a directive to insurance companies, instructing them to promptly process and settle claims from policyholders. The move comes in response to numerous complaints received by the commission regarding lengthy delays in claims settlements.

In a circular, IPEC Commissioner Grace2 Muradzikwa acknowledged the concerns raised by policyholders and emphasized the urgent need to address the situation. 

She stated that the prolonged settlement of claims undermines public confidence in the insurance sector, highlighting the importance of timely claims processing and clear communication with policyholders.

"Timely claims settlement is critical as this directly impacts policyholder satisfaction, market penetration, and confidence in the insurance sector. 

"Insurers are expected to conduct thorough evaluations and process claims promptly while ensuring clear and transparent communication with policyholders regarding the status and progress of their claims," said Dr. Grace Muradzikwa in the circular.

The directive outlined that once insurance companies receive all the necessary claim submissions, a decision must be made and communicated to the policyholder. Furthermore, once the claims authorization process is finalized, the claim should be settled within three working days.

Failure to comply with the directive will result in a level 4 penalty for each day the insurer is in default, as per Section 5 of the Insurance and Pensions (Issuance of General Guidelines and Standards) Regulations 2020. Additionally, insurers are required to maintain a complaints register, documenting the details of each complaint and its resolution.

The issue of delayed claims settlement has long been a concern within Zimbabwe's insurance sector. Between January and June 2023, 61 percent of complaints received by IPEC were related to delays in claims settlement.

Several factors have contributed to this situation. 

Some insurance companies have been intentionally delaying or denying claims, unjustifiably repudiating them, and taking excessive time to settle claims in order to safeguard their revenue. 

This practice is driven by the need for insurers to generate profits. 

Under section 22 of the Insurance Act [Chapter 24:07], the Commissioner has the authority to cancel an insurance license if an insurer fails to meet its liabilities under policies.

Another factor impacting prompt claims settlement is the rising level of premium debts within the sector. 

In some cases, insurers have been forced to offer insurance on credit due to the ballooning rates of unpaid insurance premiums. 

In June 2023, the amount of unpaid premiums reached ZWL$180.40 billion, a significant increase from the ZWL$15.7 billion reported in the same period in 2022. 

This situation has placed short-term insurers in a precarious position, compelling them to settle claims for policies with outstanding premiums or claims that occurred before full payment was made.

The chairman of the Insurance Council of Zimbabwe, David Nyabadza, stated in November 2023 that delayed claim settlement was a result of the adverse impact of premium debtors on liquidity. 

He said that this, in turn, compromised service delivery and led to the high number of complaints received by IPEC. 

In response to these challenges, the "no premium no cover policy" was enacted through Statutory Instrument (SI) 81 of 2023. 

The policy stipulates that insurance coverage will only be provided if the premium is paid in advance, ensuring the validity of the insurance contract.