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Life Assurance
Tuesday, July 1, 2008
For the consumer

Consumers who prefer dealing with companies specialising exclusively in the provision of funeral policies – so-called ‘assistance business companies’ - will in future be able to buy funeral insurance for benefits of up to R18 000. The previous limit of R10 000 was increased by Finance Minister Trevor Manuel with effect from 1st April 2008.
Comments Lerato Mametse, Deputy Executive of the Life Offices’ Association (LOA), “It has been the LOA’s contention for several years that the assistance business limit should be increased. Life companies with full licences (as opposed to limited licence assistance business companies) generally offer funeral benefits of R20 000, although some extend this type of cover to R50 000. We therefore believe that the increase to R18 000 goes a long way in levelling the playing fields.”
Mametse says since R10 000 is no longer enough to meet the costs of a reasonable funeral, it was unreasonable to restrict policyholders to this limit. She says increasingly consumers were turning to full licence life companies for their funeral cover because they were able to offer higher benefits. This left assistance business only companies, whose business is almost entirely funeral business, at an unreasonable competitive disadvantage.
Mametse says assistance business offers an invaluable service to the economically disadvantaged sector of the community and the previous restriction on the benefits prejudiced the long term survival of these offices. She adds that they form an important bridge between the burial society movement and fully fledged long-term insurers.
She also points out that the Zimele product standards for funeral insurance allow policies to provide cover of up to R20 000. “It therefore did not make sense that assistance business companies could provide cover of only R10 000.”

Zimele Protection
Mametse says following the successful launch of the Zimele standards for funeral products just over a year ago, the LOA started developing product standards for other life insurance products with the aim of making them not only affordable, but also appropriate for the low income market. These standards were approved by the Financial Sector Charter (FSC) earlier this year.
“The Zimele brand aims to help South Africa’s low income earners, those earning R3 000 a month or less, to identify those life insurance products that meet the FSC’s minimum protection requirements.”
Zimele is a Zulu word meaning “to stand on your own two feet”, and as a brand represents life insurance products that are accessible, appropriate, simple, affordable and offer good value for money.

The cost of a funeral

Mametse says when the LOA requested an increase in cover limits for assistance business a detailed assessment was done of the costs of a typical funeral.
Based on information provided by LOA member companies who have undertaking businesses, the following costs are incurred on average:

Other costs that need to be considered include:

Repatriation: To transport a body and mourning family members from Cape Town to Eastern Cape, for instance, can cost between R6 000 to R8 000.
Catering: This will include food, tents, chairs and cooking utensils. If entirely outsourced, both the funeral and vigil can cost from R3000 to R5000.
Transport: Family vehicles and buses for mourners.
Rental of sound system.

Mametse says the cost breakdown above shows that an average funeral could easily have a financial impact on the family of more than R15 000. She says funeral insurance helps mitigate the burden of cost and innovative developments such as wider family cover have greatly increased the benefits funeral insurance offers.
<crosshead>Tips when buying funeral cover
<body text>Make sure that the person selling you the policy (referred to as the intermediary) is licenced by the FSB as a Financial Service Provider (FSP) or is a representative of an FSP accredited to market the products of a registered life company. The intermediary must be able to prove this. You can check an individual against the LOA Intermediary Register on www.loa.co.za or call the association on (021) 421 2586.
To confirm that the company whose policy you are being offered is indeed a registered long-term insurer, contact the FSB on 0800 110 443.
If the policy is underwritten by a registered life or assistance business company, the intermediary must be able to produce marketing material from that company providing more information about the policy you are about to buy. Once the policy has been issued, you must be provided with a summary of the conditions and requirements relating to the policy. You then have 30 days in which to change your mind.
Make sure you receive a policy certificate with information about the person or persons who are covered in terms of the policy, the amount of cover, the premium, as well as a clear breakdown of costs.
Ensure that you receive a receipt for every cash payment you make towards the policy premium every month. The receipt must display the information of the insurance company that has underwritten your policy.

Copyright © Insurance Times and Investments® Vol:21.6 1st July, 2008
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