The Sunday Mail
Emmanuel Kafe
RECENT complaints by some policyholders over the treatment they get from funeral assurance companies have sparked debate on the design of funeral policies in Zimbabwe and promoted a general understanding of terms and conditions of contracts.
Some even argue that at present, traditional burial societies are giving subscribers a better deal compared to formally registered funeral assurers.
However, could this not be a case of distant pastures looking greener?
Over decades, burial societies have played an important role in times of bereavement by helping members conduct decent burials for their loved ones.
Just like all formal assurance companies, burial societies require one to pay monthly instalments that are at times as low as US$5 or its equivalent per month.
But the subscriptions may vary depending on the dependants per family. The benefits include a coffin, cash, transport and food for fully paid-up members.
In some instances, burial societies are known to throw lavish end-of-year parties for their members.
Furthermore, some enterprising societies have set up small grocery shops that benefit members mostly through credit sales.
Others offer loans to members who have pressing financial needs or even share profits annually. The services sometimes include the provision of medical aid cover.
So, does this mean these largely informal associations are more profitable than formally registered funeral assurance companies?
Caution
Founder of Kuchemana Burial Society in Mt Hampden, Ms Prisca Moyo, cautions that while burial societies provide cover in times of bereavement, there are cases of pilfering and poor administration that affect operations.
“The biggest challenge with these schemes is embezzlement of funds. Most people no longer feel free to join burial societies because their leaders divert funds for personal use,” warned Ms Moyo, whose association has about 35 members.
She formed the society after a local funeral insurance company refused to bury her husband following a misunderstanding over subscriptions.
“I had a funeral insurance policy during that time, but it refused to cover the burial of my husband because we missed a couple of payments,” said Ms Moyo.
Ms Anna Chareka was also hard done by a Mufakose-based burial society.
“These are mere money-making pyramids which seek to make profits and benefit specific people while neglecting their members. There is no transparency in burial societies. Most of them are ripping us off. I faithfully paid my subscriptions and only missed a month when my relative was not well. I was then denied service after my dependent passed away,” said Ms Chareka.
Most burial associations are said to allow a three months’ grace period before the “contract” of a defaulting member is terminated while others instantly terminate it.
The Insurance and Pensions Commission (IPEC) has since engaged the Zimbabwe Association of Funeral Assurers (ZAFA) to address the concerns of policyholders who claim they do not get a fair deal.
“IPEC acknowledges the concerns that have been raised by the public and wishes to advise that before the current discussions on the matter, IPEC, in line with its mandate of protecting the interests of policyholders, was already in engagement with funeral assurers through their association, ZAFA, on these and other issues,” said IPEC in a statement.
“These engagements, which also centre around product design and pricing are expected to culminate in reforms that will ensure the vibrancy and sustainability of the sector and the protection of policyholder interests.”
Traditionally, burial societies in Zimbabwe, and elsewhere in the region, have functioned as a means of informal insurance for low-income earners who struggle to afford “high-class” life assurance policies.
A burial society is a community-based group that runs a mutual assistance scheme, where members share risk by pooling their finances, each contributing an agreed-upon monthly amount.
It is an informal funeral scheme that offers help during the planning of a funeral, but members are usually not bound by a contract.
However, the society is often governed by a constitution and there are rules on how many family members you can cover and how much should be paid out.
The total number of local burial societies is not certain, but South Africa has at least 100 000 registered associations.
Some people value burial societies because they are embedded in African culture and customs, and offer moral support.
They are also said to offer faster payouts, and less documentation is required when going about the process, as there is rarely need for formal documents such as death certificates since members are known to the community.
This is contrary to financial institutions’ plans that are governed by statutory and regulatory bodies.
They operate in a rigid and volatile environment that requires them to apply astute business decisions to stay afloat.
Unlike burial societies that usually conduct their businesses in backyards, formal funeral assurance companies have several costs to meet, which include rent, rates and regulatory obligations.
As at June 30, 2022, seven out of the eight funeral assurers were compliant with the regulatory Minimum Capital Requirements of $62,50 million as prescribed by Statutory Instrument 59 of 2020.
In its half-year funeral report, IPEC said all players needed to be well-capitalised at all times.
The sector is urged to adequately prepare for the new risk-based capital regime, which will be in line with the implementation of the Zimbabwe Integrated Capital and Risk Programme in 2023.
Hidden costs
Client service practitioner, Mr Bright Jonhera, who has a decade of experience in the business of death, said, while it costs less to bury a policyholder than what he contributed, the narrative that funeral insurance companies are taking advantage of policyholders is simplistic.
“It is not a rip-off and not a taboo to prepare for death just like what we all did with burial societies. There is a need for people to understand the terms and conditions of their policies. It is just that the past economic environments were too harsh for the insurance sector and the consequences affected policyholders,” he said.
Mr Jonhera urged the public to be aware of what each policy provides since insurers have different packages.
He equally urged clients to thoroughly go through their contracts, including the fine print.
“If you buy a funeral policy, it does not mean the insurance provider will cover you from the time you pay your first premium. Instead, you have to delay for some time before insurance coverage starts,” said Mr Jonhera.
The waiting period refers to the interval between the time of a policy purchase and when you can be covered. It varies on the chosen plan, level of coverage and insurer.
“For some reason, people think this is unfair. Are we saying, when one joins that policy, after contributing just US$6,99 in a single month, a funeral company should be compelled to give the policyholder a US$1 000 burial?
“Even with the three-month waiting period, a funeral assurer would only have received less than US$21 from a policyholder. They will still have to bury them for a huge amount, and despite being good at investing, they would have not grown that money,” notes Mr Jonhera.
The average waiting period is three months for the core family package, and in some cases, insurers ask for six months for dependants other than the spouse and children. This is called a policy term, which is the life of an insurance policy.
There have been complaints that some of the companies are not offering expected benefits. These include cash-back guarantees, and even a grocery and education benefit.
Nyaradzo chief executive officer, Mr Philip Mataranyika, welcomed the call for additional benefits by clients.
“We welcome the call for additional benefits such as cash-back by our clients. As an organisation that listens, understands and provides solutions, we will go to the drawing board to come up with the solution that our clients want.
“We consider it a product enhancement feature, which must be priced by our actuaries first before we come back to the market as the current products were not priced for cash-back,” said Mr Mataranyika.
He further said some funeral assurance companies, Nyaradzo included, have always had policies that mature from inception.
Clients, he said, were free to choose from an array of products and services on offer.
A maturity benefit is a lump-sum amount the insurance company pays policyholders after the prime of life of the insurance policy.
“We have three types of funeral policies that mature, which are the executive, classic and budget plans. Maturity periods on these products depend on age, with younger people paying low premiums for longer periods while older people pay higher premiums for shorter periods, according to actuarially arrived-at premiums,” explained Mr Mataranyika.
These policy types, he added, cover only the immediate family, made up of husband and wife and their biological children.
“Over time, our engagement with customers revealed that there was need for a policy that covered parents on both sides, which was flexible and affordable, and we came up with the Six Pack Plan.
“We did well with the Six Pack, with many clients choosing it ahead of the traditional type policies. Most clients even cancelled their existing policies such as the Executive, Classic and Budget that matured, switching over to what we called a new generation of policies that didn’t mature. Why? They said their main worry in terms of risk was their parents,” he added.
He said, through further engagements with clients, they found out that they wanted cover for members of their extended family such as uncles, aunts and grandparents.
“We responded, coming up with the Score Pack Plan that allowed for the inclusion of anyone the principal member could afford to pay for.
“The only conditions are that any member added must survive for three months after the policy has been signed up and also that the policy doesn’t mature, and clients were happy,” said Mr Mataranyika.
ZAFA president, Mr Arthur Mukasi, said policy maturity means there are no further premiums to be paid by the insured.
“There is no payment done at maturity. Payments are done when the insured event (death) happens. This is regardless of it being a service or cash plan. Note, funeral policies are for life and not endowment,” he said.
“Clients should note the conditions of their policies and benefits offered before they sign off the contract as it will be impossible to change later.”
On funeral cash-backs, the ZAFA president said these are plans that guarantee cash-back after a certain number of claim-free years.
“Policyholders know at inception if the policy they are taking has the cash-back component or not. Products that are not designed to offer the benefit from inception cannot, at a later stage, offer it as the decision is made at product development stage by actuaries.”
Policy lapses
A lapse means a funeral coverage is no longer active, and that is mainly due to non-payment of premiums.
“Death claim payments will not be made if the insured passes away and no policy changes can be made at this stage.
“According to the Insurance Act (Chapter 24:07), policies which are five years but less than seven years lapse after six months of no payments. It is also important to note that insurers are obliged to notify the proposer that the policy has lapsed,” said Mr Jonhera.
Failure to do this may force the policy to be reinstated if need be. Policyholders should avoid a lapse by making scheduled payments on time to the insurer.
Paid-up funeral policy
With this policy, all the premium payments are complete and the insured is free of all payment obligations. No further premium payments will be required and the insurer continues to provide cover.
Suicide
Funeral insurance experts say if a policyholder claims within the suicide clause period, there will be no death benefit for beneficiaries. A suicide clause is a standard clause in life insurance policies that limits payments made to survivors of a policyholder who dies by suicide within a certain period after purchasing the policy.
“If death happens after the suicide clause time frame, then beneficiaries will get the death benefit. Some insurers give two years, but this varies, so you will need to check your policy document for this.
‘‘Besides funeral benefits stated in the policy document, there is no other benefit entitled to the policyholder,” Mr Jonhera explained.
