The funeral assurance sector witnessed 6,5 percent growth in Gross Written Premium for the period ended June 30, 2018 compared to the same period last year and could witness further “exponential” growth as more consumers opt out of cash plan products.
The growth statistics are contained in the Insurance and Pensions Commission (IPEC) half year report for the period ending June 30. Funeral cash plan products, which see policy holders getting cash pay-outs in the event of death, are falling foul of the increasing costs of goods and services and some leading providers in the sector have started reviewing their prices upwards.
In an interview with The Herald Business, Zimbabwe Association of Funeral Assurers (Zafa) president Solomon Chikanda, said funeral assurance policy holders are insulated from inflation in that they sign for defined benefits and that the assurer then invest towards delivering the service.
However, the same does not apply to funeral assurance sector players whose contracts bind them to provide agreed services and goods despite prevailing prices at the time a policy holder suffers a loss.
“The obvious thing is that when people sign for our products they want to be buried in the event of passing on, or their relatives buried,” said Mr Chikanda.
“So when you then get money in an environment where there is inflation you might then realise that when you come to service providers you might be shocked to note that your money is not enough to buy basics like a coffin, let alone to hire a hearse.
“But if it’s an assurer you are guaranteed that no matter what the prevailing prices are, you will still get the service that you signed for,” he said.
In a message to its policy holders earlier in the month, a leading player in the cash plan business implored policy holders to review their policies in line with the prevailing inflationary trend.
“Did you know operational cost of managing death has risen? You are thereby advised to adjust your policy in line with the rise in prices,” said the service provider to a policy holder on November 14.
Market watchers say instead of reviewing policies that will have a corresponding effect of a rise in their pay-outs, consumers are likely to entrust their faith in guaranteed service that comes from funeral assurers.
“Who can afford a rise in insurance when we know almost all employees have not gotten any income increment?” queried a market watcher who declined to be named.
“Obviously you will see a situation where more and more people getting inclined to funeral assurance which guarantees a service and this could see further growth of the sector,” he said.
In its latest report IPEC also notes that Doves Funeral Services remains the leading provider in the sector and it also cemented its position with a 16,15 percent growth in gross written premiums.
Doves also remains the most capitalised in the sector to the tune of $17 million followed by First Funeral which is at $4 million.