Are South Africans over-insured when it comes to funeral cover?
Johannesburg - In mid-April 2022, South Africa passed 100,000 Covid-19-related deaths. At the same time, the South African Medical Research Council reported more than 300,000 excess deaths in the country since the start of the pandemic. These numbers are reflected in life insurance claims, with the Financial Sector Conduct Authority (FSCA) recording a 50% to 60% increase in life claims against fully underwritten individual life policies (where the insured has undergone a full risk assessment) between March 2020 and January 2021.
Funeral cover is the most common insurance product in South Africa, with 42% of adults claiming to have a funeral product. The share of South Africans who have any other insurance is just 19%.
But those consumers may have even more funeral cover than they realise; or they may have cover from multiple providers, without knowing how much they could save by consolidating.
"Many consumers have multiple policies – often even from the same insurer. This means they may be over-insured," explains Simon Nicholson, director at leading insuretech and Hippo.co.za partner Simply. "It also means that they're often overpaying for the cover they have, given that it's generally much more cost effective to have one large policy than several smaller ones."
The value of having one consolidated funeral policy (as opposed to multiple smaller ones) becomes clear when you look at the numbers from comparison platform Hippo.co.za. For example, a 34-year-old female would pay R292 a month across three small policies, which together would provide R50,000 coverage. Yet, if she had just one comprehensive policy, she would pay R125 to R130 for between R70,000 and R80,000 of cover. A 24-year-old male would pay about R283 for R50,000 of cover across three policies as opposed to R101 to R121 for up to R80,000 of cover on one comprehensive policy
"From our data, it's clear that if you consolidate your funeral cover by comparing quotes, you could enjoy significant savings," says Hippo.co.za CEO Bradley Du Chenne. "When you take out a funeral policy, remember to determine how much cover you need and how much cover you already have through other policies s. Make sure that you understand the benefits on offer, as well as any inclusions and exclusions, and that you and your loved ones understand the claims process and how it works."
Du Chenne believes that if consumers examine their funeral cover, they'll realise that they have more than they need – and that they could save money by consolidating their cover. Nicholson agrees, and points to industry trends that reflect this.
"We believe there will be an increasing focus on funeral consolidation, where clients with multiple funeral benefits will look to replace these with a single policy that provides the same cover more cost-effectively," Nicholson says. "This will also encourage products with great flexibility to tailor benefits to enable the replication of the old cover amounts."