Agenda 1. Overview Burial Societies Funeral Parlours The Client 2. The Ecosystem 3. Challenges/Insights 4. Opportunities 5. Conclusion 6. Q&A
Overview • Burial Societies • Characteristics:- – Bound by the communal spirit. – Are friendly societies. – Are an informal form of insurance. – Have tangible benefits. – Build solid relationships. – Are “member friendly”. – Total amount invested annually approx. R6.4bn (more 100000 burial societies across South Africa).
Overview • Funeral Parlours – Industry is very fragmented. – Regulation enforcement is a challenge – Low barriers to entry resulting in “fly -by- nights”. – Some offer policies that are not underwritten. – Most offer funeral services and NOT monetary benefit. – Funeral Packages expensive and not negotiable. – Consumer not allowed to shop around. – Most localised with limited geographic footprint.
Overview The Client – Financially included – use/have financial products and/or services (formal and/or informal). – Financially excluded – do not have/use financial products and/or services (if borrowing, they rely on friends/family; and if saving they save at home – 6% of the SA Adult Population!!). – Consumers generally use a combination of financial products and services to meet their financial needs (can have a bank account and also belong to a burial society).
“The Ecosystem” Individuals subscribe to a Burial Society of their choice. Burial Society Executives enter into an arrangement with a funeral parlour of choice. Funeral Parlour provides burial service as per pre-arrangement.
Challenges/Insights Burial Societies: 1. Weak governance – leaving contributors vulnerable. 2. Generally no defined/quantifiable benefits. 3. Lack financial capacity to honour claims all the time. 4. The need to attend monthly meetings a challenge for migrants.
Challenges/Insights Funeral Parlours : 1. Poor compliance with FSB regulations. 2. Cost of Compliance. 3. Unscrupulous business practices. 4. Working Capital for day to day operations. 5. Access to capital for expansion. 6. Skills. 7. Succession Planning.
Challenges/Insights The reality and negative impact of regulation is that some burial societies/funeral parlours close shop for fear of penalties from the regulator as they may not be fit or proper thus negatively affecting access to micro insurance. Costs of regulation and compliance puts pressure on businesses.
Opportunities Partnerships between established insurers and parlours will result in: – capitalisation of synergies between policies and funeral provision. – consolidation of funeral industry. – “Big Brother Effect” – established insurance companies will be able to “incubate” the smaller players and assist with compliance, governance, risk management and training. – Quantifiable financial benefits for the financially excluded vulnerable communities as per Micro Insurance legislation objectives. – bridge the “trust gap” between the financially excluded and big insurers. – Financial product distribution (parlours within communities).
Opportunities “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 Africa adult population are members of a burial society – so the importance of this sector must not be underestimated. Burial societies also represent a significant spend with members prioritising 15% of their income for this financial product” says Inseta’s CEO Sandra Dunn.
Conclusion Industry education is crucial. Business support to include financial support. Formalisation of the funeral sector will result in the protection of the client. Need for appropriate use of “carrot and stick approach” to encourage players to comply. Need to develop more relevant micro insurance products beyond the traditional insurance products. The challenge for the Regulator is that the funeral industry is not united.
Q&A
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