THE funeral assurance industry has not been spared the negative effects of the financial services sector’s entry into insurance business, Insurance Institute of Zimbabwe (IIZ) president Chomi Makina has said.
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.
Moonlight group chief executive and IIZ president Chomi Makina 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 the funeral assurers because you find that banks and life insurers are also doing funeral insurance and it means that the cake which we were partaking of is getting smaller. But nevertheless, the penetration rate although estimated by some at between 1 and 2%, we are still far off in terms of insuring the larger population,” said Makina.
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 also 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 (IPEC) noted that the economic situation is weighing heavily on the informal sector and called on funeral assurers to unveil micro-insurance 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.
“We have observed that a lot of people in Zimbabwe are going into the informal sector and this has been known for quite some years now. We have tailor-made a few micro-insurance products which will be launched soon,” he said.
Makina said the portfolio mix was spread out relatively well with 40% of premium income emanating from government, 10% from corporates as more companies continue to close shop and 50% from informal traders who pay cash or through the company’s Flexi-pay system.
Moonlight presently holds 43% of the market share according to a latest report by the Insurance and Pensions Commission.