Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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SundayOpinion: Old Mutual payouts: Is this a fair deal?

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 

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 

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.


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