“The fund will not sell risk or make a profit. It will simply seek to cover the expected payouts,” said Van Vrede. “Private insurers exaggerate risk anyway,” he added. The department expects to pay out R1.5 billion in benefits per year, indicating 150 000 deaths. According to Van Vrede, most insurers in the grant beneficiary market simply charge the maximum 10%. This amounts to R150 a month for a similar benefit to what the department proposes, amounting to about R10 000. “There is huge money in it for industry, but that is to the detriment of beneficiaries,” said Van Vrede. “There is a strong need for funeral benefits in that market – and there is a need for government to intervene. “I wouldn’t call it a market failure, but it is hugely expensive and not all that beneficial.” People will still be free to buy additional cover once they get their grants, but these amendments will result in the insurance industry being judged according to the state’s pricing, done on a not-for-profit basis. The bill is currently out for public comment and the industry’s major players are not prepared to say anything about it yet. Sanlam, which makes use of the regulation 26(a) deductions through its subsidiary, Channel Life, declined to comment. Laurence Hillman, CEO of Telesure Investment Holdings subsidiary 1 Life, said they “are engaging to understand their [government’s] thinking”. “We do not know enough about the proposals yet. We certainly don’t charge too much; our rates are fair and we provide great value,” said Hillman. Likewise, Lion of Africa CEO Paul Myeza told City Press he did not want to comment. Earlier this year, Lion of Africa challenged the department in court over its selling of funeral insurance to child grant beneficiaries.
Should the government be getting involved in the local funeral business? ONGOING BATTLE
The contentious deduction mechanism created by