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Funeral Insurance
Thursday, April 1, 2010
Getting formal

Burial Societies may be an important avenue of savings in black communities and rural areas, but they risk losing their market share to the formalised financial services sector.

“This is because they are lacking the skills and resources to provide their large and growing market with the right products and services at the right prices,” says INSETA chief executive Sandra Dunn.
“The Burial Society sector operates largely at the periphery of the mainstream financial services sector. Being unregulated it can leave customers vulnerable to poor service, unfair pricing and practices. We believe the sector and the public will benefit from the establishment of a proper, suitable working framework,” she adds.
Burial Societies have massive potential for wealth creation within South Africa’s poor and vulnerable communities, given the right assistance. “Research has shown that more than 20% of the South African adult population are members of a burial society,  and that they contribute an average of 15% of their income towards this form of saving.”
Comments Abe Mkhize of Impucuko Projects, a community development project organisation, “Funeral Insurance has so far been neglected as far as skills development is concerned, and so the Government has expressed a desire to integrate the sector into the formal economy.
“According to Insurance Sector Research, Funeral Insurance has experienced an increase in growth of 2,3% between 2004 and 2008. This is despite the general increase in unemployment.
Adds Dunn, “It will be a challenge to mobilise and organise the sector but INSETA intends to help ease the transition by providing the necessary training and skills development. We will be working with industry players to make the process easier and to give it support.”
Dunn notes the funeral insurance sector faces many other challenges too, including competition from the formalised sector; lack of appropriate risk rating skills; inadequate controls to manage fraud risks; and the myriad of problems that HIV/AIDS creates.
“Burial societies need to organise themselves to become more competitive in the economy. We hope to help both them and their significant market through a Burial Society Indaba.”
This was to take place in Johannesburg on 23rd and 24th March, and will give the informal sector the opportunity to engage with government and key insurance businesses to investigate the possibility of establishing a working  framework, whilst at the same time exploring new opportunities for growth and skills development.
 

Copyright © Insurance Times and Investments® Vol:23.4 1st April, 2010
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