The Insurance and Pensions Commission (IPEC) has urged funeral assurers to revisit their business model to deal with the strong presence of life assurance companies in the sector.
The life assurance firms are writing more business than the traditional funeral assurance players, making it difficult for the dedicated funeral assurance companies to stay afloat and their ability to write new business is adversely affected.
IPEC’s report for the six months to June 30, 2022, shows that life assurance companies have dominated the funeral space, with 71% of their gross premium written (GPW) generated from funeral assurance business.
The development has threatened the dedicated funeral assurance companies’ viability.
“The funeral sector is urged to revisit its business model so that it deals with the compliance issues and increased competition from life assurers amongst other things and this may also require funeral assurers to realign their balance sheets,” part of the IPEC report reads.
Zimbabwe has eight funeral assurance companies.
Another big worry, IPEC said, was that none of the companies in the sub-sector had re-assurance arrangements in place during the period under review.
“Sector players are also urged to have reassurance arrangements in place as a risk management tool to manage loss experiences. The Commission reminds funeral assurers that the business of assurance is the business of meeting the promised benefits which include timely payment of claims and providing burial services,” it said.
GPW for the funeral assurance sector increased 17.20% to ZWL$556.24m in the reviewed period from ZWL$474.61m reported in the prior comparative period.
In terms of forex business, the sector recorded a gross premium of US$132 359 and R119, 082.
Total assets for the funeral assurance sector increased by 16.01% to ZWL$5.16bn in June from ZWL$4.45bn as at March 31 2022.
However, all funeral assurers were not compliant with the minimum prescribed asset ratio, with an average prescribed asset ratio of 0.08% for the sector, against a required ratio of 10.00%, as stipulated in Statutory Instrument 206 of 2019.
The total amount invested in prescribed assets was only ZWL$4.20m against the required minimum amount of ZWL$516.29m to comply with the minimum prescribed asset threshold of 10%.
The report showed that seven out of eight funeral assurers were compliant with the regulatory minimum capital requirement of ZWL$62.50m, as prescribed in Statutory Instrument 59 of 2020.
Total technical liabilities for the funeral assurance sector increased by 69.70% in nominal terms from ZWL$1.43bn as at 31 March 2022 to ZWL$2.42bn as at June 30, 2022, with future policyholders’ benefits being the major component constituting 99.75% of the technical liabilities.
Profit before tax for the funeral assurance sector increased by 347.24% in nominal terms to ZWL$265.39m in the reviewed period from ZWL$59.34 m in the six months to June 30, 2021
The profit before tax increased by 53.39% to ZWL$91.02m from ZWL$59.34m, after adjusting for inflation.
For the six months ended 30 June 2022, two players dominated the funeral assurance sector in terms of GPW, with a total market share of 83.92%.