Chronicle Editor
Michael Magoronga, Business Correspondent
THE Insurance and Pensions Commission, (Ipec) has challenged funeral assurers to address industry shortcomings in order to avoid being crowded out by life assurers.
This comes as the funeral assurance sector is dominated by two funeral assurers who enjoyed a combined market share of 81 percent in 2020.
During the period under review, only three out of a possible eight funeral assurers reported capital positions that were compliant with the regulatory minimum capital requirement of ZW$62,50 million as prescribed in the Statutory Instrument 59 of 2020.
In a funeral assurance report for the period January to September 2020, Ipec said most funeral assurers have submitted capitalisation at the instigation of the commission.
“Going forward, ZICARP ( Zimbabwe Intergrated Capital and Risk Programme) will address these problems by bringing in a capital calculations model that will help to give more accurate capital positions.
“In the interim, funeral assurers are expected to comply with the prescribed minimum capital requirement that are currently stipulated,” reads the report.
The commission received two complaints which related to delay in the statement of a claim, while the other had to do with payment of outstanding premiums on a paid-up policy.
“The funeral assurance sector needs to come up with products that speak to the changing consumer tastes for the sector to remain relevant and ward off dominance by the life assurance companies who are also writing funeral assurance business,” it said.
Ipec also raised concern over lack of compliance in the sector.
“The commission is concerned with funeral assurers’ lack of compliance with key regulatory issues which include minimum capital requirements prescribed asset ratio and high premium debtors.
“There is therefore need for funeral assurers to quickly address these issues of regulatory concern,” said the commission.
In terms of earnings, for the period under review, six funeral assurers reported profit before interest and tax while two reported losses.
As at September 30, 2020, the funeral assurance sector reported an average current ratio of 179 percent, an indication that on average, the sector held more than enough current assets to meet current liabilities.
“Funeral assurers are therefore encouraged to align their current asset holdings by adopting credit policies that limit exposures on trade receivables.
“The commission continues to emphasizes the need for funeral assurers to invest in appropriate short-term assets that are liquid, which allows them to meet their statutory and operational short-term obligations,” said Ipec.
With regards re-assurance, for the same period, none of funeral assurers had any reassurance arrangement in place for the nine months under review.
“The commission continues to encourage funeral assurers to consider having reassurance arrangements as a mechanism to support their balance sheets.
“This will enable them to write more business,” it said.
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