Rise in Covid-19 deaths could overwhelm an under-capitalised funeral insurance industry

Rise in Covid-19 deaths could overwhelm an under-capitalised funeral insurance industry

HARARE – The surge in COVID19 cases and related deaths has stretched the capacity of the funeral assurers. According to Zimbabwe Association of Funeral Assurers (ZAFA) general manager Taka Svosve, the demand for the funeral services is on an upward trajectory with capacity in an undercapitalized sector currently stretched.

This comes as only three (Sunset, Moonlight and First Funeral) out of the eight funeral assurers are compliant with the regulatory minimum capital requirement of $62.5 million, according to the latest IPEC report for the third quarter to September 2020. In the same period, GPW declined 15.02% to $17.96 million due to the inability of premium income to keep up with exchange rate-induced inflation, which characterized the economy for much of the first and second quarter of the year.

“We are still computing the figures from our members, but what I can say off hand is the demand has been increasing and as an industry we are stretched with claims,” Svosve said. The country has, since the start of the lockdown, recorded an average 14 deaths a day with a low case fatality rate of 2.4%.

The basic requirements for a funeral parlour should be lowering devices, a fleet of cars and a cooling room with a capacity to “accommodate all bodies” to meet the rising demand. Philip Mataranyika, Nyaradzo Group CEO urged funeral insurers and the public not to panic but to continue following COVID19 guidelines and continue to offer services to their clients. “My word to the public is, let us continue to observe the protocols already announced to avoid contracting the disease. In the unfortunate event that we lose a loved one, we should not panic as service providers like with any other loss of life ready to provide our dear departed with a decent send off.”

“From our perspective, we have so far done all we can to make sure that those who lose their lives will be given a decent sendoff, consistent with the World Health Organisation Guidelines as well as those announced by the Government. We have built capacity countrywide over the years, that is now coming in handy given the challenges we face and may continue to face until a vaccine or other curative solutions are found.”

Meanwhile, IPEC continues to underscore the need for funeral assurers to re-align their business models to adapt to the realities unfolding in the business environment. “This should be the industry’s top priority if players are to reverse the current decline in real GPW,” said the regulator in the third quarter report. IPEC also noted that none of the funeral assurers had any reassurance arrangement in place for the nine months period. “Funeral assurers should consider having reassurance arrangements as a mechanism to support their balance sheets. This will enable them to write more business.”

Profit before tax for the funeral assurance sector increased by 31.27% in real terms to $1.74 million for the nine due to the decrease in claims incurred and operating and administration expenses. The industry average expense ratio was 65.94%, while the average claims ratio and the combined ratio stood at 26.88% and 92.81% respectively. “The average expense ratio for the industry is highly unsustainable, as such funeral assurers are continuously reminded of the need to streamline their expenses to levels that are sustainable and manageable going into the future.”

The two biggest funeral services providers; Nyaradzo and Doves are now listed under Life Assurance. Doves GPW in the nine months was at $199.03 million and total assets at $316.46 million while Nyaradzo was at $482.3 million with total assets of $1.63 billion.FinX Online