Funeral assurance companies in marginal growth

Business Reporter
FUNERAL assurance companies experienced marginal growth last year as the illiquid environment chewed into premiums growth and collections, industry regulator the Insurance and Pensions Commission has said.
In the year to December 31, 2015, gross premiums written grew two percent to US$36,5 million from US$35,9 million recorded in 2014.
Net premiums written rose by a marginal one percent to US$36,5 million, which shows the funeral industry “has largely remained subdued”.
Like other economic sectors, the funeral assurance industry has been hamstrung by liquidity challenges, low consumer spend and a shrinking job market.
Many companies shed jobs after a July 17, 2015 Supreme Court ruling that allowed employers to terminate employment contracts on three-month notices.
“Funeral companies are still facing challenges in premium collection and liquidity.
“The stagnant growth rate suggests challenges such as liquidity squeeze, job cuts and a shrinking market base,” said IPEC.
The report is based on direct funeral insurers only and does not include funeral business underwritten by life companies.
It shows that three funeral assurers – Doves, First Funeral and Moonlight – wrote 88 percent of the net business, while the remaining six players contributed 12 percent.
Of the US$36,5 million gross premium written during the year, individual policies generated 38 percent while corporate business contributed the bulk.
“New business has been elusive, with funeral assurers only underwriting two percent of the total business as individual policies.
“The commission encourages the industry to continue efforts to tap into the uninsured informal market in the short to medium term so as to mobilise new business,” added IPEC.
During the period under review, total claims were US$9,5 million compared to US$11,1 million in the prior year.
Total commission was 11 percent – or US$3,1 million – of total costs.
The industry recorded an average combined ratio of 81 percent and claims ratio of 26 percent. Assets grew nine percent to US$51 million from US$47,3 million a year earlier.
The prescribed assets are still below the required 7,5 percent, with average remaining below 1 percent.