THE funeral business in Zimbabwe became lucrative in the first quarter of the year recording a 49% jump in net premium to $19 million spurred by individual business lines.
Report by Own Correspondent
The Insurance and Pension Commission (Ipec) said in the period under review, venerable individual lines contributed $10 million to the funeral industry representing 56%, while the remainder of $9 million was weighed in by corporate business.
This gave a fair portfolio balance though some players entirely depended on venerable individual lines.
The industry reported an operating profit of $6 million despite a growing combined ratio of 70% worsened by increasing operational and claims costs.
The funeral industry is dominated by four companies, Nyaradzo Holding, Doves, Moonlight and First Life, controlling 90% or $17 million of the business written in the first quarter of the year.
Total liabilities doubled the growth of assets, which closed the quarter at $64 million up from $40 million reported in the corresponding period last year.
Ipec said the industry was adequately capitalised, although there was need to attend to both solvency and liquidity challenges for continued sustenance
According to Ipec, new business proved elusive for the industry, as recurring business constituted $16 million or 85% of total gross premiums, with the regulator saying there was need for insurance companies to improve on innovation.
“This may be a red flag for industry to invest in product innovations coupled with expansive product distribution strategies,” Ipec said.
The regulator added that the first quarter statistics proved that funeral assurers had not taken up policies valued at $231 000 believed to be a by-product of liquidity challenges on the part of potential policyholders.
Ipec said during the period, some funeral companies reported high lapse ratios in excess of 25%, which could be a display of unlawful market malpractices such as miss-selling and switching, although this was peculiar to a few players only.
Funeral companies reported $2 million or 13% of gross premiums in premiums receivables, which the regulator said were acceptable given the current economic challenges.
Ipec, however, said players are reminded to notify policyholders well in advance of the consequences of not paying premiums and formally cancel policies whenever applicable.
Funeral companies were reportedly adequately capitalised in excess of $400 000, as prescribed by Statutory Instrument 189 of 2009, although the regulator said players must take heed of the new minimum threshold.
“However, players must take heed of the impending new capital levels as prescribed in Statutory Instrument 21 of 2013, which are partially due on June 30 2012,” Ipec said.
The regulator also advised industry to address solvency risk, on a continuous basis, with assistance from their actuaries.