Zimbabwe’s tobacco industry has been rocked by a scandal involving contractors collecting insurance premiums from unsuspecting farmers contracted under them, prejudicing the growers, Business Times can report.
Multiple players told Business Times this week that the contractors, who are not authorised to transact insurance business, were not remitting the premiums, which range from US$70 to US$120 per every hectare registered, to insurance companies.
Instead, the contractors have been diverting the premiums collected to fund their operations.
The deceitful act was also confirmed by the insurance sector regulator, the Insurance and Pensions Commission (IPEC) this week, saying the contractors were prejudicing the farmers, who are supposed to be insured by registered insurance companies.
IPEC’s insurance and microinsurance supervision director, Sibongile Siwela told Business Times that there will be serious repercussions for such actions.
“The Commission has received such reports amid indications that some contractors receive insurance premiums from farmers but do not remit the money to insurance companies,” Siwela told Business Times.
“The Commission has engaged the Insurance Council of Zimbabwe (ICZ) over the matter and there are on-going investigations to establish the facts. We will take appropriate corrective measures if these allegations are proven true because it would be out of order for insurance entities to sign up policyholders without their consent.”
It is understood that the corporate fraud is becoming common practice with more tobacco companies joining the scheme – collecting millions in insurance levies which are not remitted to licensed insurance players.
Said Siwela: “There are also allegations that some insurance companies sign up tobacco farmers without their consent. In some instances, insurance premiums are bundled into the farming inputs and tobacco farmers have no option but to take the insurance. It is, however, the non-remittance of premiums to the insurer that is of concern to us, which leads to non-settlement of claims by insurers.”
She said IPEC will also be engaging the Tobacco Industry Marketing Board (TIMB) to come up with ways of improving the process of buying insurance by farmers.
She also warned the public against buying insurance policies from unlicensed intermediaries to avoid being short-changed.
“The Commission will take appropriate measures in terms of the law if it’s established that there are unlicensed entities who have been transacting insurance business when they are not authorised to do so,” Siwela said.Contracted farmers who account for 95% of tobacco grown are obliged to pay insurance for every hectare grown.
Some sources close to the developments said TIMB has turned blind eye to such malpractices.
But TIMB disputed, saying it has started investigations on the issue.
IMB CEO, Meanwell Gudu said the board was engaging IPEC over the issue.
“We are investigating the matter and we will revert after we have completed the investigations but so far we only know of two companies and we will continue to monitor the situation,” Gudu said.
“As TIMB we are bringing to book those who fail to comply with the rules. This we do after growers raise a red flag and we investigate and prove if what is being said is true.”
As of last Friday, which was day 35 into the selling season, farmers had sold 99.3m kilogrammes for US$296m against 120.6m kg sold for US$325m during the comparative period last year.
This year tobacco has sold at an average price of US$2.98 per kg against US$2.69 in the same period last year.
According to experts, 5% of all the sales were earmarked for insurance and with US$296m grossed so far, US$14.8m was supposed to be remitted towards insurance but the majority of the money has not gone to the insurers but to contractors.