Life assurers are honing their strategies in order to capture the multi-billion rand funeral business, reports Jacques Magliolo
How big is the funeral business? Big enough for the life assurers to fight tooth and nail for it. Financial Services Board long term insurance manager Oppie Opperman says: “In 1993 total premium received by the life assurers registered to conduct funeral business amounted to R327,5-billion.” The 1994 figures are not available, but estimates range between a 25 to 35 percent increase.
While this business is obviously an extremely lucrative one, the “big boys” are only now realising that there has been a lack of understanding of the manner and the types of policies which they have marketed to the public, particularly to the black community.
The large assurers were reluctant to talk to us, citing that this area was “confidential and sensitive to competition”. However, Fedlife’s new venture with Thebe Investment Corporation, called Safricon, was willing to discuss the matter.
Fedsure and Safricon national sales manager Tony Diogo says: “The essence of the new venture is to target black funeral business. In 1994 we received R60-million in premium income and we expect to increase this by 60 percent this year.”
He expects to achieve this through the company’s connection with trade unions like the South African Workers Union, through Stokvels and undertakers.
“It is high risk, but we are developing new group schemes to cover residents of certain areas, rather than only employees,” he says.
Another company which is targeting this market is retailer Wooltru, which has established a new Transvaal region inhouse insurance company, run by business development officer Dion Goldie.
He says: “Over the past 10 years life assurers have continually improved funeral policies, but it is only in the last few years that they have tried to accommodate the black population.”
“Black people have specific needs which cannot be met by standard life cover,” he says, indicating that new trends will concentrate on group schemes which “are cheaper and meet most of their needs”.
These group schemes include:
* Receive cash immediately. Instead of the assurer paying for the actual funeral, it would provide cash to the beneficiary. This enables payment for travel to the homelands where black people are often buried by the beneficiary. In addition, there are custom-related traditions which would not be paid for under normal life schemes.
* Extending cover to parents and to the husband’s numerous wives. The principle is that, if the husband dies, the first wife and all the children are covered. If any of the wives die before the husband, he would receive a payout.
* Better explanations (through marketing) on how to claim. Beneficiaries usually supply a death certificate which has been provided by a doctor. This is not acceptable to life assurers, who insist on a certificate from Home Affairs.
* Policy keeps pace with inflation. The old Funeral Book system tended to create the perception that assurers paid for the full expense of a funeral, but — after 10 years of premiums — these actually amounted to a fraction of funeral costs.
* Group schemes are controlled by the government and are tax free. Despite assurers’ attempts at improving funeral policies under group schemes, they are limited to government restrictions. Says Opperman: “Registered assurers may provide benefits of up to R2 000, but can apply to the registrar to extend that to R5 000 a policy.”
Is this enough to pay for a funeral? Goldie believes it is. “It depends on where you are and what magisterial district you wish to have your burial or cremation, but for most black areas R5 000 is enough,” he says.
“The life assurers have applied to the government to extend this amount to R10 000, which would be in line to meet most of their specific needs,” he says.