IPEC focuses on funeral assurance companies

Published: 31 July 2017

The Insurance and Pension Commission has come up with a micro-insurance framework which provides for less stringent registration requirements as the commission works on reducing unregistered funeral assurance companies in the market.

Speaking at the Funeral Assurance and Services Conference in Bulawayo yesterday, IPEC Commissioner Tendai Karonga said these unregistered assurers collect premiums from policyholders with no regulatory and adequate remedies.

"One of the challenges currently bedeviling the funeral assurance industry is the existence of unregistered entities. Such unregistered, not only have unfair competitive edge over registered players in terms of regulatory costs, but also pose risk to their policyholders.

"These unregistered assurers collect premiums from policyholders with no regulatory no adequate remedies in the event of these policyholders being shortchanged," said Mr Karonga.

"If funeral assurers are registered and thus regulated by IPEC, we are able to proactively take measures to protect the interests of policyholders through our on-going supervision," he said.

Mr Karonga said IPEC appreciates the service offered by these unregistered funeral assurers especially those serving the previously excluded parts of the market.

Pursuant of the need to ensure that the all funeral assurers are registered, the Commission has come up with a microinsurance framework which provides for less stringent registration requirements.

"It is our considered position that these measures will ensure that all funeral assurers operate legally, thus enhancing policyholder protection," said Mr Karonga.

He said current economic challenges have led to an increase in lapse ratios as well as non-taken up policies as policyholders fail to raise money to pay premium due to economic hardships.

There are nine funeral assurers. The business model for dedicated funeral assurers is based mainly on provision of funeral services when the trigger event happens.

There are 11 life offices authorised to conduct funeral assurance business. The business model for life assurers is distinguished from that of dedicated funeral assurers by settlement of funeral claims in cash as opposed to funeral services.

The depressed economic environment has led to low disposable incomes since companies are closing down, retrenching and downsizing.

This has resulted in low uptake of insurance products, premium debtors and an increase in lapse ratios.

The shift of business from the formal to the informal sector has also presented a challenge for funeral assurers which call for review of business models which relied on salary based premium payments.

While some Zimbabweans view funeral assurance policies as a vehicle to provide a dignified funeral to their relatives, unscrupulous and dishonest fraudsters see it as a money-spinning opportunity. A deeper analysis on insurance fraud will be made on the presentation on combating of funeral assurance fraud.
- BH24

Tags: IPEC,