New funeral policy payout limits set

23 Apr, 2023 - 00:04 0 Views
New funeral policy payout limits set

The Sunday Mail

Tawanda Musarurwa

Subscribers of funeral policies will now pay premiums amounting to US$6 000, or the equivalent in local currency, before their policies are deemed fully paid-up, according to new regulations from the Insurance and Pensions Commission (IPEC).

This brings to an end all forms of perpetual premium payments by funeral policyholders. It also means most premium funeral policy pay-outs will not exceed the US$6 000 ceiling.

The insurance and pensions sector regulator’s new directive on funeral assurance products, which comes into effect on July 1, follows complaints by policyholders over the design of local funeral policy products and practices of funeral assurers.

Some of the practices include, but are not limited to, the design and sale of products and services (for example, funeral policies that do not mature), unjustified delays in settling valid claims, high penalties for policy terminations and misleading marketing claims.

And with funeral insurance accounting for around 80 percent of all insurance policies in Zimbabwe, non-maturing funeral policies were one of the most common complaints from policyholders.

“Each funeral policy covering a single life shall be limited to a maximum sum assured not exceeding an amount of US$6 000 or the Zimbabwe dollar equivalent using the prevailing interbank exchange rate,” reads part of the directive.

The regulator has also directed all underwriters providing funeral assurance products to comply with Section 60 (1) (a) and (b) of the Insurance Act (Chapter 24:07), with regard to grace periods allowed before a policy lapses.

There have been complaints that some funeral assurers were arbitrarily terminating policies as soon as a policyholder defaults on payments.

In terms of Section 60 of the Insurance Act, grace periods for funeral policies range from six months (for policies in duration of force of five years or over and less than seven years) to 60 months (for policies in duration of force of 25 years or over).

The new directive compels funeral underwriters to pay out a full sum assured in instances where an individual has multiple policies.

IPEC, however, said funeral cover provided under group life assurance schemes is not interpreted as multiple funeral assurance policies.

“Where a policyholder has continuously paid premiums for an existing secondary policy and met all the terms and conditions of the policy, he/she is entitled to a cash in lieu of service that is equivalent to the sum assured of the policy,” adds the directive.

IPEC has also moved to limit the period of all annually renewable policies.

“Going forward, all annually renewable policies will have a limit of three years after which they become long-term policies with a maturity date and shall have a term not exceeding 25 years from the date of conversion from an annually renewable policy to a long-term policy,” reads part of the directive.

“The policy shall mature at the end of the premium paying term.”

Dr Grace Muradzikwa

Said IPEC Commissioner Dr Grace Muradzikwa: “The funeral directive is also issued in order to improve the governance structures and systems for funeral business underwriters for the protection of funeral policyholders.”

The directive is in line with the Treating Customers Fairly Framework, which came into effect on June 1, 2021.

Zimbabwe Association of Funeral Assurers (ZAFA) president Mr Arthur Makasi said the sector will comply with the directive, despite some of the association’s submissions not being taken into account by IPEC.

Mr Mukasi said the guideline on lapsing of funeral policies is already being implemented by the industry as per Section 60 of the Insurance Act.

Unsatisfactory service was the major issue among all the funeral assurance-related complaints received by IPEC last year, accounting for 80 percent of all funeral assurance complaints for the year.

The balance of the complaints related to issues of delays in settlement.

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