Statistics indicate that 42% of South Africans had funeral cover in 2021, down from 53% in 2019. This is surprising considering that the pandemic increased claims, as well as people’s fear of death, the world over and significantly impacted the funeral insurance market and the claims environment.
Many consumers who did not have funeral cover cited affordability as the main reason. It is such an insight that reiterates the misconception that funeral insurance is a product for the less wealthy. However, if we look at the world we live in, this couldn’t be further from the truth.
Let’s look at the stats…
According to the Association for Savings and Investment South Africa, there were over 1.5 million claims across funeral, life and credit insurance in the industry between 1 April and 30 September 2021. The value of the benefits paid out was a massive R92 billion. There was also a notable drop in policy lapses.
The reality is that the cost of a funeral starts at about R15 000 and can escalate to over R100 000. Even if you are at the upper end of the earning spectrum, let’s be honest … a R100 000 funeral can set most people back, with some families taking on debt to cover funeral costs.
Funeral cover goes beyond the actual funeral, and, in many instances, the benefits that are associated with that cover create an additional buffer for the policyholder.
Opportunities in the affluent market
How people buy funeral cover has also changed, and changes in local legislation have opened up a new category of funeral policies that cater specifically to the more affluent – offering cover of up to R100 000 and providing financial advisers with a critical opportunity to tap into this market.
The beauty of it is that a client can make use of various funeral plans/cover amounts that tap directly into their larger financial portfolio and plan so that if they don’t want the more “affluent” type of cover, they have the opportunity, through some insurers, to buy flexible amounts of cover for themselves and up to 16 additional family members.
Fast and efficient pay-outs
But it’s also about speed and efficiency. Financial advisers should remind their clients that while they may have the money to cover a funeral, estates can take a long time to wrap up, creating financial constraints for families – an unnecessary pressure when dealing with the emotions of losing a loved one. That’s why, once you have provided your client with the advice and direction to consider funeral cover, it’s critical that they choose cover that pays out quickly, to negate the financial pressure. Things such as the ability to make a funeral claims decision within three minutes, through robotic automation technology – which we launched in 2019 – are critical to the funeral-buying process, ensuring families have immediate access to their money.
Shift in the funeral market
As financial advisers, it is within our power to guide our clients and ensure that their beneficiaries are not left carrying the financial burden. This holds true for affluent or mass-market clientele.
What is interesting is that we are already seeing this shift in the funeral market. Over the past two years, we have seen a significant increase in the life and funeral insurance space. During Covid-19, we saw a 46% lift in intermediated funeral sales, and today we are still seeing claims figures that are 20% to 25% higher than pre-Covid-19 levels.
Similarly, while there has been substantial growth in the mass market, the combination of life and funeral product sales in the more affluent market is seeing a higher sum assured, indicating that funeral is NOT only for the mass market, but certainly the affluent market is showing promise in this space.
Kobus Wentzel is the executive head of distribution at 1Life.
1Life Insurance Ltd (Reg No. 2005/027193/06) is a Licensed Life Insurer and Financial Services Provider (FSP No. 24769)
