Funeral firms rack in $9m in first quarter

COMPANIES in the funeral insurance industry raked in $9,3 million in premiums in the three months of the year, a two percent increase from $9,1 in the comparative period last year, latest statistics have revealed.

In a report released last week, the Insurance and Pension Commissions noted the funeral insurance companies’ total cost during the period increased by six percent compared to last year.

As a result, technical profit for the quarter was $2,5 million, a seven percent increase from the same period last year.

“Total industry assets as at 31 March 2016 were $53 million, a 11 percent growth from $48 million reported for the same period last year. Prescribed assets are still below the required 7,5 percent with the average compliancy being below one percent. The commission fined players as well as inviting compliancy plans in line with the law for prescribed assets which are still below the required percentage.”

The report said the market was still concentrated on the big three funeral assurers which include Moonlight, Doves, and First Funeral. The three funeral assurers wrote 89 percent of net business for the period ended 31 March up from 86 percent last year. There is a gap between the top three and the other six players. The other six include Sunset, Cell, Ruvimbo, Foundation, Vineyard and Passion.

“In the period under review, individual policies generated 61 percent of the total business underwritten while corporate business contributed 39 percent of the gross premiums written by the funeral industry. New business remains elusive this quarter, with funeral assurers only underwriting three percent of the total business. The remainder of the business, 97 percent, has been recurring. The liquidity challenges and job cuts are the main challenges affecting growth in this industry.

“Moreover, direct funeral underwriters are now facing increased competition from life companies who are now underwriting funeral products as well. This may translate to more choice and value creation on the part of policyholders through product innovations, improved benefits and policy sweeteners,” Ipec said in the report.

The report further noted that for the period, the industry recorded total premium debtors amounting to $2,4 million or 26 percent of the gross premiums underwritten.

“To improve this scenario, players are encouraged to come up with tailor-made products coupled with premium payment methods which are cognisant of the current liquidity challenges. For example players are encouraged to exercise non-cash payments on their payment platforms,” said the commission.

For the period under review, operational costs amounted to $4,3 million or 56 percent of total costs compared to $4,1 million or 58 percent in the same period last year. Claims amounted to $2,3 million or 33 percent and total commission was 11 percent or 870 000 of total costs. Ipec said cost management continued to be a critical survival strategy in this challenging economic climate. Ipec said it approved compliancy plans as well as fining non-compliant players.

The report said growth of assets since 31 March 2012 has been very inconsistent, with the industry suffering negative growth from 2015. “This can be explained by negative returns in equities, (-33 percent) and money market -72 percent, witnessed by the market.” The commission said players must use actuarial guidance in addition to regulatory guidelines to manage investment risk.