Chronicle Editor
Gibson Mhaka, [email protected]
THEY say death doesn’t have to be expensive but for Mr Sam Moyo (78), a pensioner, his death is apparently going to be an extremely traumatic and difficult experience for his family.
This is because his funeral policy was arbitrarily revoked in 2020 by a local funeral assurance company after he failed to pay subscriptions for three months despite the fact that he had been contributing religiously to the company for more than two decades.
Mr Moyo, who strongly felt the company had ripped him off when it revoked his policy without any formal communication, couldn’t afford the services of a lawyer to sue the company.
He is not alone in this predicament.
There has been a growing trend in Zimbabwe where many policy holders whose funeral policies are being revoked without any formal communication after they would have failed to pay subscriptions for three months.
This is despite the fact that there is a directive enshrined in Section 60 (1) (a) and (b) of the Insurance Act (Chapter 24:07) which made it mandatory for all funeral policies to be issued with the schedule under the act regarding grace periods and in addition, in terms of the funeral directive, all funeral assurance policies must not be arbitrarily lapsed without formal communication to the policyholders at least 30 days prior to the date of lapse.
“I know conversations about death and funerals are never pleasant but certainly necessary, as we’re all confronted by death at some point in our lives. My family will feel the pressure to arrange a funeral for me after my funeral policy was revoked in 2020 without any formal communication by a local funeral assurance company after I failed to pay subscriptions for three months. This is despite the fact that I had been contributing consistently for more than two decades,” lamented Mr Moyo.
While it has been a heart-breaking time for him, a recent directive issued by the regulator of insurance and pensions in Zimbabwe, Insurance and Pensions Commission (), enforcing funeral and life companies to give funeral assurance products grace periods before the arbitrary lapsing of policies is a welcome relief for policy holders who have suffered from arbitrary policy terminations and high penalties for policy terminations.
“The main objective of the directive is to provide minimum guiding principles to ensure that all the assurance players that offer funeral products have effective systems in the design and distribution of funeral products in Zimbabwe, guide the life and funeral assurance industry on the reforms to be applied to funeral policies and outline the minimum expectations and requirements for the design and distribution of funeral assurance products in Zimbabwe,” said IPEC.
IPEC noted that all funeral policies issued must be accompanied by the schedule stipulated in Section 60 of the Insurance Act. The schedule specifies grace periods applicable for different periods for which premiums would have been paid.
“The grace periods and corresponding durations in force are as follows. Six months will be given for policy holders with five years or over and less than seven years. Nine months will be given to those with seven years or over and less than nine years. 12 months will be given to those with nine years or over and less than 11 years.
“The 18 months’ grace period will be given to those with 11 years or over and less than 14 years. A two-year grace period will be given to those that have subscribed for 14 years or over and less than 17 years.
“A three-year grace period will be given to those with 17 years or over and less than 21 years. A four-year grace period will be given to those 21 years or over and less than 25 years. 60 months will be given to those that have 25 years or over duration in force,” reads the directive.
“The directive which becomes operational with effect from 1 July 2023 further directs the maximum limit that all funeral assurance policies must assure, with no minimum amount applicable.
“Each funeral policy covering a single life shall be limited to a maximum sum assured not exceeding an amount of US$6 000 or ZWL equivalent using the prevailing interbank exchange rate. All funeral assurance policies shall not be arbitrarily lapsed without formal communication to the policy holders at least 30 days prior to the date of lapse,” said IPEC.
Last year, Nyaradzo Assurance Company clients sparked an uproar on social media accusing the firm of ripping them off by revoking policies if the insured failed to pay subscriptions for three months, when they would have been paying them consistently, in some instances for decades.
That prompted IPEC to issue a statement in October last year acknowledging the concerns.
According to IPEC, a total of 370 716 insurance policies lapsed in 2022, 14 631 being funeral assurers and 356 085 life assurers, as markets struggled to keep pace with inflationary pressures and exchange rate volatility.
IPEC Director Insurance and Micro-insurance Mrs Sibongile Siwela said funeral and life assurers have embraced the directive on funeral assurance well.
She however, said there were a few clarifications being sought by the industry on implementation modalities to which the Commission is attending to.
“Grace periods were always provided for in section 60 of the Insurance Act (Chapter 24:07). The latest development is, therefore, enforcement of the regulation.
“The directive helps to clarify issues to do with how and when a policy should be lapsed in line with obtaining regulations.
“This will allow fair treatment of policy holders and help to avoid arbitrary lapsing of policies by funeral underwriters. The Directive has made it mandatory for all funeral policies to be issued with the schedule under Section 60 of the Insurance Act regarding grace periods.
“In addition, in terms of the Funeral Directive, all funeral assurance policies must not be arbitrarily lapsed without formal communication to the policy holders at least thirty (30) days prior to the date of lapse. It also improves the level of awareness of policy holders when it comes to lapsing of policies,” said Mrs Siwela.
She said the Commission was committed to fair outcomes for insurance and pension consumers, and as such, would continue to enforce the fair treatment of policy holders.
“All complaints with regards to arbitrary lapsing of policies by funeral and life assurers on funeral assurance are dealt with in terms of Section 60 of the Insurance Act (Chapter 24:07) as stated above.
“From the policy holders who have raised complaints with the Commission, we noted that most of them were not aware of the provision for grace periods in the said regulations.
“We believe that inclusion of the schedule as part of the Funeral Directive was to re-emphasise the issue and ensure that policy holders are aware of their rights,” she said.
The Zimbabwe Association of Funeral Assurers (ZAFA) president, Mr Arthur Makasi, is on record saying that the industry will comply with the directive, even though some of the association’s submissions were not considered by IPEC
A financial consultant who preferred anonymity for professional reasons said there is, lack of confidence in the market about insurance policies adding that many people think that insurers are only there to take their hard-earned money.
Insurance expert Farai Francis Zhara said there is an urgent need to embark on an awareness and education campaign sensitising consumers on insurance products and issues that affect their perceptions towards insurance policies.
“I believe the real issue is lack of consumer education. IPEC should embark on a public awareness campaign educating them on the most pain points.
“Teaching and encouraging policyholders to immediately report any act of malpractice or if they feel that they were not fairly treated by the insurer and failed to find each other after engagements, they may IPEC and lodge their complaints.
“Very few people know that reporting to IPEC is ideal, fast and easy. They think reporting to the police is best. I therefore believe that if consumers receive enough education the noise like the one we are witnessing on social media platforms will be minimal,” said Zhara.
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