Funeral industry braces for competition

Markets
THE funeral assurance industry has not been spared the negative effects of the financial services sector’ entry into insurance business, Insurance Institute of Zimbabwe president Chomi Makina has said.

THE funeral assurance industry has not been spared the negative effects of the financial services sector’ entry into insurance business, Insurance Institute of Zimbabwe president Chomi Makina has said. KUDZAI CHIMHANGWA BUSINESS REPORTER

The tightening liquidity crunch, continued company closures, increasing informalisation of the economy and low disposable incomes have forced the banking sector to diversify into many sectors including construction projects, medical aid and insurance, among others.

Makina who is also the Moonlight group chief executive said funeral assurance businesses would have to adopt innovation as a method of surviving the unprecedented competition posed by this development.

“There is a big knock for funeral assurers because you find that banks and life insurers are also conducting funeral insurance and it means that the cake which we were partaking of is getting smaller. Nevertheless, the penetration rate although estimated by some at between one and 2%, we are still far off in terms of insuring the larger population,” Makina said.

He said the market still exists in its entirety although the problem lies in the manner in which premiums will be collected.

“The liquidity crunch has affected the sector in that some businesses are experiencing viability problems and therefore they are failing to remit premiums on time, while some of them are closing shop meaning there is no collection of premiums causing policy lapses,” he said.

In its latest report, the Insurance and Pension Commission noted that the economic situation was weighing heavily on the informal sector and called on funeral assurers to unveil microinsurance products.

Turning to Moonlight Funeral Assurance, Makina said the firm was expecting a 20% increase of the $6,9 million collected in premiums over the past trading period, in the next six months. This he said would be achieved through initiatives targeted at the informal sector.

Makina said the portfolio mix was spread out relatively well with 40% of premium income emanating from the government, 10% from corporates and 50% from informal traders.