Commercial Farmers Union of Zimbabwe

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Save pension and insurance industries

Save pension and insurance industries

ZIMBABWE-DOLLARSMartin Tarusenga
At the centre of the stand-off between pensioners and insurance companies, in which Government has now resolved to intervene through the pending Commission of Inquiry, are the questionable benefit figures calculated by actuaries.

The figures were so inconsistent with common sense and with reasonable expectations, the public spontaneously complained and in unison when insurance companies dared publicly announce them from 2009, soon after dollarisation. In many instances, the figures strangely entitled more benefits to pension fund members who had made just one worthless lump sum Third Zim$ contribution in 2008, than members had been contributing for more than 20 years. There were more inconsistency with these figures, an entire article or more must be devoted to enunciating them — hence the pending Commission of Inquiry.

What has to date not been questioned, is why a profession so well respected worldwide produced such nonsensical figures and proceeded to disseminate the figures to the public officially as correct — never mind the dotted scandals associated with the profession in a few countries and over the years. Even more bizarre was the blind acceptance and support of the numbers by chief executives of insurance companies, with the managing director of one of the largest insurance companies publicly declaring that the figures were “. . . done professionally. . .”

Following challenges from pensioner groups, insurance companies with the help of conflicted Board Members in the Board controlling the Regulator of pension and insurance industries, Insurance and Pension Commission (IPEC), resorted to suppressing the report on the investigation on the correctness of these figures carried out by another actuary in 2012. From then on pensioner groups and the public were even more convinced, insurance companies and IPEC had something to hide about the figures. Nevertheless the report is now available following the intervention of legal counsel for pensioners — the figures are suspect alright, according to the report.

To the keen eye, the actuarial profession in Zimbabwe had all along been conducting itself in a not so transparent manner and in several instances.

The very stance, explicit and implied, of announcing that pension funds were not sound in 2009, and could not honour full rightful benefits, when they had all along certified the funds sound lend the profession untrustworthy. There was no courtesy attempt, on the part of the actuaries to explain to the public how exactly this volte face stance came about — they owed the public this explanation.

It is not at all apparent if it occurred to this profession that it was duty bound to understand this turn of events in 2009 and before, from a categorical scientific actuarial perspective. It is still lying about what it did in various discourses that the public has been fortunate to engage this profession, for instance when Government calls for stakeholder discussions.

The author has a long peripheral association with the profession in Zimbabwe even having helped with attempts to resuscitate and reinvigorate the profession a few times.

To their knowledge, the profession has not done much in the way of well researched professional papers aimed at servicing the pension and insurance industries, and resolving the problems that the industries face.

To this extent inflation became a problem in the late 1990s and degenerated into hyperinflation, almost ten years later, without much as word from the profession to strategically guide pension fund operations and in the process guide Government policies in this regard.

 

In particular none of the practising members endeavoured to establish the state and progression of the relationship between real interest rates, inflation rates and interest rate risk margins over the years, none of the practising members did any categorical papers on the appropriateness of inflation indices used in the country in preserving pension fund benefits, and they failed to check how these economic variables impacted on pension and insurance benefit preservation — in fact the profession did not do much in the way of informing the public and the authorities, categorically, that there is a need for something called benefit preservation.

It is not still not very clear whether the profession has conducted any concerted research on actual Zimbabwe mortality rates applicable to the various population groups, and that are so critical in correctly evaluating the pension and insurance policy contract values — if not the profession is still inaccurately making adjustments to mortality bases developed outside Zimbabwe, probably with much relevance to Zimbabwe actual mortality.

There are other areas of the discipline that have not been explored categorically to establish the true peculiarities of Zimbabwe in this regard.

Without such regular of professional papers and without other pertinent professional practices, the actuarial profession in Zimbabwe has purportedly relied passively on the direction that external actuarial practices have taken — 34 years since independence! That is, there is not much attempt to shape local actuarial practice to suite Zimbabwe peculiarities. In the circumstances actuarial services that pension and insurance funds require, such as actuarial valuations have essentially been premised on the whims of a few individual actuaries practising in Zimbabwe, and without any pubic checks and balances given the risks of such individual unilateral endeavours. There is, in these circumstances, scope for mischievous conduct by the individual actuary to deter any attempts to challenge their work, and to keep a monopoly.

In this latter regard, it is apparent that some actuaries had somehow persuaded key players in the industry, IPEC included, to require anyone so challenging their work to be an actuary. This made it difficult for the ordinary person to report any seemingly questionable services from pension funds. Actuaries further built patronages in the industries that included these key players serving to blindly endorse their work as ‘professional’ — hence the announcement by some insurance company chief executives that the numbers were ‘professions’.

It turns out that other associated risk management professions such as accountants, auditors, investment managers, banking were guilty of the same unprofessional conduct, as the problems in the pension and insurance industries can be tracked to them.

It is time Government authorities ensured that actuarial and other financial sector risk management professions provided credible services. This can only be achieved by providing incentives to those that demonstrably go the extra mile to regularly research and disseminate credible actuarial and other risk management information helpful to pension funds and Government policy formulation, as earlier highlighted. Government should in this regard emphasise that it is not good enough to have the certificate of actuary, or other.

This should inhibit any incentives to play mischief at the country’s detriment.

It must further be emphasised that there will be consequences for anyone so attempting such mischief.

  • Martin Tarusenga is general manager of Zimbabwe Pensions & Insurance Rights, email, This email address is being protected from spambots. You need JavaScript enabled to view it. , telephone; +263 (0)4 883057; Mobile; +263 (0)772 889 716. Opinions expressed herein are those of the author and do not represent those of the organisations that the author represent.

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