Investigating the impact of inflation on life assurance policies in Zimbabwe: a Monte Carlo approach

Author

Madembo, Loveness

Title

Investigating the impact of inflation on life assurance policies in Zimbabwe: a Monte Carlo approach

Abstract

This dissertation investigates the impact of inflation on life assurance policies in Zimbabwe by implementing a Monte Carlo simulation approach to find the interactions among inflation, mortality trends, and economic variables. The study identifies the massive challenge to the life assurance sector induced by hyperinflation, particularly between 2015 and 2025, that wiped out the real purchasing power of policy proceeds and eroded financial security for policyholders. The critical observations are that while nominal returns on life assurance products appeared constant, real returns were severely adverse and reflected a severe erosion of purchasing power. The research mentions profitability and liquidity issues of utmost concern, driven by rising lapse rates and Not Taken Up (NTU) policies. The research also provides efficacious strategies, including asset diversification and the move towards USD-denominated products, in order to mitigate the effects of inflation. Recommendations to the insurers, policymakers, and other stakeholders prescribe enhanced communication, variable premium plans, and greater consumer education as a way of restoring confidence and making life assurance viable in Zimbabwe's volatile economic situation.

Date

June 2025

Publisher

BUSE

Keywords

inflation

life assurance policies

mortality trends

economic variables

Supervisor

Mr. E. Mukonoweshuro