THE Insurance Brokers Association of Zimbabwe (IBAZ) last week elected Momentum Insurance Brokers chief executive officer, Takura Dzimwasha (TD) as chairman. The Daily News on Sunday Group Digital Editor Paul Nyakazeya (PN) caught up with him after his election to talk about insurance and brokerage business in Zimbabwe and other related issues.
PN: Who is the Insurance Brokers Association of Zimbabwe and what does it do?
TD: The Insurance Brokers Association of Zimbabwe is the umbrella body that looks after the interests of all Insurance Brokers in Zimbabwe. The Association is run by a management committee composed of CEOs of the broking fraternity.
The Management Committee meets on a monthly basis to deliberate on matters affecting the insurance business particularly that of Insurance Brokers.
PN: I would like to believe a handful of people are not familiar with a number of insurance jargons/terms. What is an Insurance Broker?
TD: An insurance broker is an intermediary who acts with complete freedom in the negotiation and placement of business on behalf of clients. A Broker is a Munyai we Insurance, Munyai aka Sadombo. Brokers are licensed by the Insurance and Pensions Commission (IPEC) and have to meet set criteria in terms of capitalization, skills and level of professional indemnity cover. All employees of a broking company are individually vetted and licensed to ensure that they are fit and proper. Full requirements are provided for in the Insurance Act Chapter 24:07.
PN: There is a difference between brokers and Agents?
TD: The key difference is that the insurance agent typically works for one insurance company and thus cannot scan the market. Brokers operate independently and are not tied to any particular Insurers whereas Agents are tied to particular Insurers and in most cases there are actually employees of Insurance Companies which limits the client’s options to compare different products and rates. Brokers are licensed and regulated. It’s mandatory for Brokers to have a P.I (Professional Indemnity) policy which covers errors and omissions.
PN: How then would you define the role of an insurance broker and whose interest do they serve?
TD: The role of an insurance broker is to find appropriate cover for the clients, at the right price, with the correct insurer, assist clients with claims management and the entire risk management process.
Risk Management can be simplified as – What could go wrong? Risk Identification, How bad could it be? Risk Assessment and what do we do about it? Risk Treatment. In other words, by appointing a broker, clients are outsourcing a major component of their risk management process. The Broker will work with the clients internal resources to tailor make an appropriate program.
The brokers’ primary interest is the client, the policy holder. They work for you and not the insurance company unlike other providers who are focused on selling you something. With a Broker your interest comes first. It is this focus on customer needs rather than their own that sets the broker apart from all other insurance options.
PN: Are brokers regulated and are they or what are the benefits of going via a broker?
TD: Yes, brokers are regulated by IPEC and licensed by IPEC and the requirements for one to become a Broker are stipulated in the Insurance Act 24:07 Section 35. There are minimum prescribed capital levels and the professional indemnity cover. They also lodge a security of $10 000 with IPEC. In addition brokers also should belong to the IBAZ (Insurance Brokers Association of Zimbabwe). There is also a code of conduct guiding our members. Sadly there are a handful which are currently not members and we are working on that.
Insurance is a legal contract with its own jargon and your broker will unpack it for you. The dreaded small print. The Broker will scan the entire market for you and ensure you get the right product at the right price with the correct Insurer. In addition if the broker makes an error you do not lose out as they carry P.I cover as well. In the event of a claim a broker will guide you in the settlement process. Brokers also advocate on your behalf to insurers, regulators and government to ensure affordable insurance choices and innovative products.
PN: Are there extra costs?
TD: There are no extra costs in dealing with the broker and quite to the contrary. If you go via a broker, you are likely going to pay less as they know the market and appreciate the general pricing structure. The broker is rewarded by a commission by the Insurance Company. Insurers recognize the value addition by the brokers. The broker does all the donkey work including client education. They get business which is refined and clients which have a better understanding of insurance. The brokers also justify the commission earned through value addition services like risk management surveys among other things.
PN: So one would ask what is involved with payment of premiums
TD: If one is going through a broker they pay their premium through the broker who then deducts their commission and forward the same to the Principals, who are the Insurers. When brokers arrange cover they arrange on behalf of clients but when they collect premiums they are acting as agents of insurance companies. An agent on the other end negotiates for business and the premium is paid directly to the insurance company. The whole process of collecting and remitting is controlled by the terms of trade agreement signed by both parties and endorsed by IPEC.
PN: How do you know that premiums paid through a broker had been forwarded to the insurance company?
TD: As alluded to above when a broker collects premiums they are acting as an agent of the insurer and any premium paid to a broker is deemed to be premium paid to the insurer. If you are dealing with a professional broker you should not lose sleep over this as there are enough safeguards. If a broker is in the habit of converting premiums to their own use sooner or later they will be exposed because the Insurers will raise a red flag and the broker will actually be deregistered. The Broker knows that if the premium is not paid on time the claim will not be paid on time and there is a reputational risk. However the client can also check with the insurer if there is any doubt.
PN: In the event that the premium was paid to the broker and not forwarded, is the insurer bound to honor claims?
TD: As said before, when brokers collect premiums they are agents of insurers. Any premium in the brokers’ camp is deemed to be a premium collected by the insurer.
This is however not a license for brokers to abuse. Actually if brokers receive premiums they must remit in terms of the market agreement. If they operate outside the agreement they become rogue brokers. This is why it’s important that clients deal with IBAZ members only because we rein in our members. In short, there are consequences of not forwarding premiums within the stipulated Market agreement period. The good thing though is that the client is protected. Brokers also lodge a security deposit with IPEC so that any abuse can be made good from the security deposit.
PN: How does one know the level of cover that they need?
TD: Again that is where the broker comes handy. They are on the ground to do a proper risk assessment and come up with a tailor made package to suit the clients’ needs. Brokers are the fundis. Brokers can lead brainstorming sessions as well to ensure all aspects are covered. Insurers also have direct business units but with due respect they are not as independent as the broker they tend to be biased towards products they have which may not really meet the client’s needs. They are also not in a position to carry out a market scan.
PN: Do Insurance brokers help policy holders lodge claims?
TD: The onus of completing a claim form and lodging a claim is with the client. Brokers can however assist the client to fill it in correctly. Brokers have also been encouraging Insurers to make forms simpler so that clients can fill them on their own.