FUNERAL assurance expert and South African-based Icebolethu Group chief operating officer Webster Chikengezha has called on funeral assurers to be innovative in line with the current trend of upper-class funerals to boost revenues.
Presenting at the Annual Funeral Assurance and Services Conference in Nyanga on Thursday last week, Chikengezha said there was a need for collaborative effort to fast-track the recovery of the industry from the effects of the COVID-19 pandemic.
Chikengezha said traditional funerals were slowly being replaced by the celebration of life that is characterised by luxury which should now dominate the creation of funeral products.
“Funeral insurance policies are inclusive, catering to people from all walks of life. Unlike motor insurance, which primarily serves car owners, funeral insurance serves everyone. The industry has evolved from a small, localised sector to a significant player. In South Africa, major companies have expanded their operations to cater to the growing demand,” he said.
“Global trends, such as diaspora and ageing populations, influence funeral insurance product development. Developing countries must create products that incorporate emerging trends and preferences. Virtual funerals and remote attendance have become increasingly popular. This shift requires insurers to adapt their products and services.”
Chikengezha urged developing countries such as Zimbabwe to incorporate emerging trends and preferences of the consumers.
“The celebration of life has replaced traditional funeral practices. In South Africa, middle to upper-class funerals often feature high-end vehicles, such as Mercedes-Benz and Range Rovers. The pressure to provide luxury services has increased. Insurers must balance this demand with regulatory requirements,” he said.
Chikengezha called on funeral service providers to follow regulatory requirements to protect policyholders despite the challenges the sector is facing.
“Regulatory changes aim to protect policyholders’ funds. The Risk Management and Compliance Programme (RMCP) is a notable regulatory development. Compliance with these regulations is crucial. The RMCP requires companies to have risk management and compliance programmes in place by July 31,” he said.
“The industry faces challenges, including diminished capital reserves due to the pandemic, increased claims ratios, stricter regulations and demanding clients. Collaboration and representation are necessary to navigate these challenges. Industry players must work together to address regulatory concerns. The industry must adapt to changing trends and regulations. A cap on the sum assured for funeral policies has been introduced in South Africa to combat fraud.
Chikengezha said the industry must balance regulatory compliance and development and innovation to make the regulator’s job easier.
“In South Africa, regulators capped the sum assured for funeral policies at R100 000 to combat fraudulent activities. The funeral industry must balance growth with regulatory compliance and innovation. If the minimum capital requirement is affordable, it means that when increasing capital requirements, regulators won’t impose a blanket rule. Instead, they will assess businesses individually, considering factors like annual retained premiums and reserves,” he said.
“In South Africa, funeral costs can exceed R500 000 (approximately US$33 000). For instance, a single funeral can cost between R300 000 to R500 000. This has led to the growth of the funeral insurance industry, with many players entering the market.
“For example, in South Africa, the minimum capital requirement for macro-insurance is R4 million. However, they also require 15% of the annual retained premium to be held in reserves. If your 15% exceeds R4 million, the higher amount applies. This approach ensures insurers have sufficient capital to support their business. The regulator should reconsider the minimum value and paid-up value product designs.”
He said other key discussions with regulators include identifying benefits and ensuring service delivery, addressing inflation’s impact on long-term service provision, environmental, social, and governance compliance reporting and currency conversion challenges. These issues require careful consideration to avoid future problems.”