SundayOpinion: Old Mutual payouts: Is this a fair deal?
Sunday, 14 August 2011 19:09
By Desmond Kumbuka
Old Mutual, arguably the largest life assurance conglomerate in the country,
has been running advertisements informing policyholders that the values of
their policies had been converted into US dollars. The company announced
that it is carrying out a “payout exercise” and went on to explain the
categories of policyholders eligible for the payments.
Policyholders are being given the option to either be paid cash for their
policy values or to transfer them to existing products, in which case they
presumably remain policyholders on the company’s books. There is an
interesting rider to this offer — the option of being paid cash is allowed
only if the policy value is less or equal to US250. Where the policy value
is greater than US250, the policy “must remain in force with benefits
payable from age 55.” This, according to the company, will enable
policyholders to invest more contributions into their policies until
maturity.
What the Old Mutual advertisement does not explain is the rate of conversion
from the defunct Zimbabwe dollar to the US dollar and the basis of that
rate. Like scores of pensioners whose monthly pension payments were whittled
down to just a few dollars as a result of the devaluation of the Zimbabwe
dollar, most of the insurance policyholders are likely to be seriously
disappointed when they see the bottom line on their precious policies.
A university technician friend, who must remain nameless to protect his
professional integrity, especially now that he lives in virtual destitution,
was paid a staggering 19 billion Zimdollars as his retrenchment package.
This amount, which seemed adequate to his needs at the time, was deposited
into his bank account from where, unfortunately, he could not withdraw to
use it or invest elsewhere because of the withdrawal limits imposed by the
RBZ at the time. No prizes for guessing what happened to the man’s saved
billions after the removal of zeros and the total collapse of the Zimbabwe
dollar.
Back to the Old Mutual undertaking: Many policy holders are anxious to
know whether in calculating the conversion to the multi-currency system,
any consideration was given to the vast building properties and other assets
that the company acquired before hyper-inflation wiped out the original
value of most of those policies. While indeed, the period of hyper-inflation
may have adversely affected incomes on many of those properties, it stands
to reason that many of the insurance firms had reaped considerable profits
from these properties prior to the depression.
And with the modicum of economic recovery following the setting up of the
inclusive government and introduction of the multi-currency regime, there
has been an up-turn, no matter how small, in the business operations of not
only Old Mutual but other insurance firms from which policy holders, who in
reality are the key stake-holders, can benefit from.
The US$250 threshhold suggested as the minimum for those whose policies are
considered eligible to continue, seems to suggest that the majority of
policies probably fall below this amount.
While insurance companies are in it for the business and obviously suffered
considerable prejudice in income and profits as a result of the catastrophic
hyper-inflation the country went through, the worst loser in all this is the
poor policy holder who, ultimately, has no say on how the income from
assets to which they contributed through a lifetime of monthly
contributions is distributed, If there is a grievance for which I as an
individual, and no doubt thousands of similarly affected Zimbabweans will
never forgive Reserve Bank Governor Gideon Gono, it is his role in
trashing our life policies by causing the inflation that destroyed the
Zimbabwe dollar.
By loping off the zeros from the Zimbabwe dollar on two occasions, Gono
single-handedly reduced to eternal penury thousands of us who had worked
for many years paying life and pension premiums religiously, in the hope and
belief that we would retire in reasonable comfort on our policies.
It is deplorable that many of those in their mid-fifties and above find
themselves virtually starting afresh in trying to save for their future
with absolutely nothing to show for the 30 or so years that they have been
in employment.
In normal countries where the government takes the welfare of its citizens
seriously, there would be a basis for state intervention to ensure that
those prejudiced by its desperate actions that resulted in the devaluation
of the local currency are not prejudiced to the extent of losing their
entire life’s savings.