Africa: much life in funeral insurance | beyondbrics

A growing desire for a decent burial among the less well-off in Africa is changing the map of things as far as insurance goes. With vast parts of the continent still uninsured, could the business of burials be one of the keys to opening up the insurance industry?

Funeral insurance policies are set to lead a rise in demand in Africa as the continent gears for a boom in the global insurance market, research shows.

Source: Munich Re

According to global insurer Munich Re, primary insurance premiums are expected to increase by ?2.2tn worldwide by 2020, with a ?35bn increase in Africa. Premiums in Africa are set to reach over ?85bn by 2020, up from ?50bn in 2012. One third of the Africa increase, or around ?10bn, is set to come from the property and casual sector, while the remaining two thirds, or about ?24bn, will come from the Life sector, which includes funeral cover.

Insurers are already reporting rising demand for funeral policies among poorer people, with Old Mutual, a South African insurer, saying it has sold funeral policies to almost a million lower-income clients in South Africa alone.

Demand for funeral insurance is particularly strong among poorer Africans because of the traditional importance attached to the ritual and an increasing desire for a ?decent burial? even among households in financial difficulties.

Junior Ngulube, chief executive of Munich Re?s African subsidiary, told beyondbrics: ?We expect demand for funeral insurance in Africa among the poorer sectors of the population to increase. For cultural reasons, this sector has an over-proportional demand for funeral insurance in relation to other classes of insurance compared with middle-class people. What drives this is the wish to be able to afford a decent funeral for family members, even though their financial capabilities are very limited.?

Munich Re?s September 2012 research reads:

With a few exceptions (such as South Africa, Tunisia, Morocco, Mauritius and Kenya), most of the African continent is still inadequately insured. Continued growth of African economies can be expected to trigger future insurance demand in as yet under-tapped markets. Demand is emerging from low-income groups and the growing middle class for personal lines and other insurances. As disposable incomes continue to grow, so will demand for life and health insurance, and many Africans who already purchase these products abroad will switch to local providers once they become more readily available.

Old Mutual is also upbeat about the expected boom in Africa. The company has set aside R5bn for its expansion in sub-Saharan Africa. It also said it was very optimistic about the funeral sector.

A spokesman said: ?With regard to funeral policies, we are the leading seller of this product in South Africa already through our Mass Foundation business, which serves those people coming into the formal economy for the first time and has around 2m customers. Funeral policies account for nearly half the products we sell to our Mass Foundation customers.?

He added: ?We already sell funeral policies in a number of the African countries where we operate including Namibia, Zimbabwe, Swaziland and Malawi, and we recently signed a deal with the National Jua Kali in Kenya, which is the co-operative for informal workers, to provide insurance services including funeral policies to its members, who previously had no access to insurance.?

Related reading:
After mobile banking, mobile insurance, beyondbrics
Old Mutual funds sub-Saharan Africa push, FT
Old Mutual?s Africa hopes, FT video
Insurers struggle to reassure investors, FT

Source: http://blogs.ft.com/beyond-brics/2013/03/27/africa-lively-demand-for-funeral-insurance/

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