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Zimbabwe’s funeral assurers default … as regulator raises concern over minimum prescribed asset ratio

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By Noah Kupeta

ZIMBABWE’S economic woes have plunged the funeral assurance sector into a crisis that has seen only 30 percent of registered players complying with the minimum prescribed asset ratio which is a prerequisite at law.

This comes as Statutory Instrument 206 of 2019 stipulates that funeral assurers should be equipped with viable minimum capital requirements to enable them meet their obligations.

Zimbabwe’s galloping inflation – which has resulted in high costs for claims instability in premium adjustments and foreign currency shortages to import critical assets – has crippled the sector.

This has presented difficulties in pricing, resulting in a decline in the industry’s capacity utilisation and low uptake of funeral assurance products as people prioritise daily needs.

Most Zimbabweans’ incomes have been depleted by the worsening economic situation that has led to the low uptake of funeral assurance products.

The country’s regulator – the Insurance and Pension Commission (IPEC), has raised concern on funeral assurers who are defaulting in meeting the regulated minimum prescribed asset ratio.

IPEC has further raised concern with the sector’s high commissions’ management and administration costs that are detrimental to the protection of policyholders’ funds.

Most of the assurers continue to report capital levels which include assets such as software and other intangibles that may not be available to fulfil policyholder obligations.

“All funeral assurers continue to be non-compliant with the minimum prescribed asset ratio of 10 percent as stipulated by Statutory Instrument 206 of 2019.

“Two out of eight funeral assurers reported capital positions above the regulatory minimum capital requirement of ZWL$62.50 million as stated in Statutory Instrument 59 of 2020 based on their unaudited financials as at 31 March 2020.

“Funeral assurers continue to experience challenges in writing new business as compared to life assurers, who wrote inflation adjusted funeral assurance business worth thirty nine point twenty seven million (ZWL$39.27) for the three months ended 31 March 2020”, IPEC said in a report.

One of the country’s funeral assurers – Fidelity Life Assurance Company – explains that prescribed assets are originated to help achieve two strategic outcomes.

Fidelity General Manager Group Marketing expert, Melanie Gumbo said decisions on prescribed assets are holistic in the interests of policy holders.

“They are meant for a developed nation and comfortable retirement for the savers (policyholders).

“Attainment of these objectives need not conflict if the prescribed assets are structured with this fundamental understanding.

“Suitable prescribed assets should be structured to provide inflation protection to policyholders”, she said.

The dismal performance by the country’s funeral assurance sector has affected policy holders’ services delivery.

Policy premium guidelines provide that a policy holder must be provided with a bus during burial times, depending on the level of the premium policy grade.

“I was not provided with a bus as per policy guidelines and my contributions.

“Technical reasons for the need to meet COVID 19 W.H.O guidelines were provided- more so citing shortage of stuff and fuel and the Public Health Act (Chap.15:09)”, narrates a policy holder who recently buried a relative in the country’s Western part.

Gumbo said there was need for funeral assurance products in Zimbabwe to ease the burden of conducting bereavements.

“Funerals will always remain for most people a challenge to finance out of pocket such as on a cash basis (using savings) given they can occur often with little notice (sometimes in quick succession for a single family), without prior preparation,” she added.

“Moreover, when they do occur policy holders do not have the luxury of time to accumulate funds. It follows therefore that people will always want to plan in advance over time through Funeral Assurance products that give them the peace of mind that they are covered in the event of the unfortunate happening.”

This article was first published by News of the South website.