First Mutual Ordered To Refund US$53 Million, ZWL$209 Million
The Insurance and Pensions Commission (IPEC) has ordered First Mutual Life Assurance Company to pay about US$53 million and ZWL$209 million to policyholders after a forensic audit unearthed prejudice through non-compliance with rules which resulted in losses to clients.
As reported by The Herald, IPEC made the order after it was discovered that losses to policyholders arose from FML’s non-compliance with rules.
The firm is accused of failure to separate accounts of different business units, abuse of management fee claims, policyholder funds being used to fund FML funeral services, and no independent directors for the assurance company.
FML has, however, challenged the findings of the forensic audit at the High Court. The firm is also challenging a corrective order issued by IPEC outlining corrective measures it was supposed to carry out.
The company cited IPEC and Finance, Economic Development and Investment Promotion Minister Mthuli Ncube as respondents. The court papers filed by FML read:
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First Mutual Life Assurance intends to challenge IPEC and the Honourable Minister’s decision on the following grounds: The decision is tainted with both procedural and substantive irregularities in that IPEC had no jurisdiction to issue the corrective order and the Hon Minister did not have any statutory authority to mandate IPEC to issue the corrective order as it did.
The decision is grossly irrational and unlawful and First Mutual Life’s right to administrative justice to be heard was violated in the issuance of the corrective order.
The forensic audit was carried out by BDO Chartered Accountants Zimbabwe. It was noted as an anomaly that shareholder payments were being made from policyholder bank accounts. The auditors said:
We noted that regular bank transfers and payments were being made from the policyholder bank accounts of both employment benefits and individual life benefits on behalf of the shareholder.
The payments were not supported by computations or monthly reconciliations as required by the company procedure manual as proof that these were earned funds by the shareholder.
We compared the actual funds earned by the shareholder with the total bank transfers and payments on an annual basis and established that employment benefit policyholders were exposed to a potential financial prejudice of US$31 million due to potential overdrawing of the policyholder bank account.
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