Currency dynamics in Zimbabwe are a sticky topic in many ways. One of them is how people in many circles get local currency yet it would be fairer to get US dollars. For instance, an employee can be working at a company where the bulk of payments made are in US dollars. This means the employee, probably a sales agent or representative, will be handling US dollars. Yet when their salary comes it can be wholly or predominantly in local currency. Such dynamics are at the heart of our discussion today regarding insurance payouts in Zimbabwe.

The Irony Of Some Economic And Fiscal Policies In Zimbabwe

One of the biggest ironies in Zimbabwe is policies that benefit entities and short-change consumers. Such policies are typically premised on pushing the use of the Zimbabwean dollar. With such policies, you will find an annoying disconnect. From the consumer’s side, they will be expected to make whatever payment is in US dollars. Then if it is the consumer that needs to be paid or get some monetary service, the entity flips to using local currency. I am not going to delve into the policies that companies abuse to do all this. The bottom line is many companies, insurance companies included; use local currency when it suits them. Yet when receiving premiums they want them in US dollars.

There Is SI 280 Of 2020 Though

The thing is in Zimbabwe companies always find ways to capitalize on loopholes or even the consumers’ ignorance at times. When it comes to our subject matter there is a statute that emphasises paying out in currency invested or contributed in. This is SI 280 of 2020, part of which reads as follows:

“Pension or provident funds that receive contributions in foreign currency in terms of this section, shall, (a) invest the contributions in investment instruments denominated in the same currency the contributions are made; and (b) in respect of fund members whose contributions have been paid in foreign currency, through Nostro Accounts, pay such member’s benefits in the currency in which the contribution has been paid” – this from Section (2) of the SI.

Then part of Section (3) of the same SI 280 of 2020 reads as follows:

“Where insurers receive premiums in foreign currency in respect of a policy of insurance in terms of these regulations, obligations to policyholders arising therefrom shall also be settled in the currency in which the premiums have been received.”

IPEC Commissioner Recently Weighed In On This

IPEC is the Insurance and Pensions Commission of Zimbabwe. It is the regulatory body that is responsible for protecting the rights and interests of insurance policyholders and pension scheme members. The IPEC Commissioner is Dr Grace Muradzikwa. This is what she had to say about our topic today:

We have pension funds who for instance invested in foreign currency in the US dollar era and when currency changed in 2019, these investments unilaterally changed from US dollars to local currency. As a regulatory authority, we believe this is unfair. If one is paying premiums in foreign currency and the investment is generating US dollars, why would you now want to give local currency to investors? So, now we expect that if an investment is made in US dollars, then the pay-out should also be in a similar currency. We have made it very clear and we have the legal instrument to back that position and that is why we are allowing our regulated entities to invest in US dollar instruments.

Know Your Rights And What You Are Entitled To

It is unfortunate that many people do not know their rights and what they are entitled to. This is usually the case in many facets and consumers are often preyed on. Companies generally know the dynamics of what is at play in a particular industry. They are usually so knowledgeable that they know how to take advantage of consumers. That is why it is essential that you seek to know your rights and what you are entitled to. This is especially important in the field of insurance. You need to be rigorous so that you are not disadvantaged. One thing I like is that IPEC has often demonstrated how intent it is on upholding the welfare of insurance consumers. If you feel you are not getting what you should be getting you can kindly engage IPEC.

It is straightforward why insurance firms should pay out in US dollars. If clients are paying their premiums in US dollars it should go without saying. Obviously, policyholders want the value of their contributions to be protected. Making pay-outs in local currency, which is volatile, is a disservice. It should be mainstream that payouts are issued with respect to the currency they were initially contributed in.