Taka Svosve, the Zimbabwe Association of Funeral Assurers boss, told NewsDay Business that this was despite the concerns that shareholders in many firms were failing to inject fresh capital to meet prescribed thresholds in the third quarter of 2020, investments into “tangible service assets” will help the sector pull through one of its toughest eras in decades.
“The funeral assurance business model in Zimbabwe is a service-based model where the funeral policy is directly linked to a defined funeral service benefit right from inception of the policy,” Svosve said.
“The assurer continuously invests in tangible service assets that are needed to meet policyholder expectation in the event of claim. Such assets include, but are not limited to mortuaries, hearses, buses, lowering equipment, caskets and coffins. These do not necessarily require the assurer to liquidate his compliance capital at the point of claim in order to meet the policyholder claim. What is important is that funeral assurers consistently replenish their service assets in anticipation of any eventuality. However, this does not mean that funeral assurers that are not up-to-date with compliance capital should sit back and relax. They should regularise their positions since this is a statutory requirement,” he added.
Svosve spoke as Zimbabwe is battling to contain a relentless surge in COVID-19 infections and deaths, which exploded in November.
The pandemic had killed over 960 people by Sunday, in over 30 000 infections.
The industry has been pushed to the limit by the surge, which came as five out of eight operators failed to meet third quarter Insurance and Pensions Commission (Ipec)’s minimum capital requirements.
Funeral assurers are required to maintain a minimum capital requirement of $62,50 million as prescribed in Statutory Instrument 59 of 2020.
It means if the pandemic continues at the pace and scale that it has exhibited lately for a prolonged period, operators that run out of capital will have no fallback positions.
In that event, funeral assurers may only avoid a crisis if they step up to inject capital, or if Zimbabwe pushes back the pandemic before balance sheets are overstretched.
“Funeral parlours are somehow managing despite the increasing constraints caused by the surge in COVID-19 deaths since the beginning of the year,” Svosve said.
“More planning in terms of infrastructure like mortuaries and even burial space need to be considered urgently since nobody knows when and how this will end. We are calling upon government to partner with funeral parlours for (investment into) related infrastructure in case the current situation develops into a catastrophe,” he said.
Economist Victor Bhoroma said the industry was already overwhelmed.
“Funeral assurance companies are overwhelmed for sure. The number of deaths has stretched the few human and financial resources on the ground, which were obviously designed with normal mortality rates in mind before COVID-19 hit,” Bhoroma said.
“This will undoubtedly impact the insurance sector with possible premium hikes to compensate for the increased costs and risks undertaken to handle pandemic debts. Going forward Ipec would also need to look at capitalisation from non-accounting terms with a clear focus on disaster preparedness and emergency management capacity for funeral assurers,” he said.