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Tawanda Musarurwa

Covid-19 has had a double whammy on Zimbabwe’s funeral assurance companies, in that it has had the negative effect of reducing cash-flows as well as damaging the firms capacities to acquire new business.

The funeral assurance sector has long been losing business to life assurance companies, and the pandemic is now threatening these companies’ going concern status.

Zimbabwe Association of Funeral Assurers (ZAFA) general manager Taka Svosve recently told journalists that members’ operations have been hamstrung by tight finances during the Covid-19 induced national lockdown.

“Most companies, including banks, were closed at the first stage of the lockdown. Transactions were not flowing including payments. In actual fact there was an abrupt stop to most business transactions when the first 21 days of lockdown were introduced,” he said.

“Some client companies and individuals suddenly stopped generating income. It therefore became difficult for funeral assurers to receive or follow up on their premiums from both individual and group clients resulting in some unexpected shocks in cash flows.”

But perhaps more importantly, with regards to going concern issues, Mr Svosve said the funeral companies were constrained in accessing new business.

“Funeral assurers rely on visiting and meeting with potential clients for new business. However, with most companies on Covid-19 induced lockdown coupled with restricted movement for both human and vehicular traffic acquiring new business became a challenge,” he added.

“When incomes of both individuals and corporates are suddenly cut as happened/happening during this pandemic naturally, getting new business for funeral assurers gets immediately affected. Funeral insurance is pushed to the bottom of the priority list under the circumstances.”

Notwithstanding the present effects of the pandemic, the sector was already facing stiff competition from life assurers who have been cannibalising their business.

According to numbers from the Insurance and Pensions Commission (IPEC)’s Funeral Assurance Report for the six months to June 2020, local funeral assurers wrote just 10,17 percent of the entire funeral business, compared to life assurers who wrote 89,83 percent of the funeral assurance business.

The sub-sector has, however, been somewhat fortunate that cases of Covid-19 in Zimbabwe have not been as bad as in other countries, especially in Europe and the Americas.

As at November 3, 2020 Zimbabwe had recorded a total of 8 389 cases of Covid-19, as well as 254 deaths, World Health Organisation (WHO) figures show.

Comparably, worldwide cases have hit 48,1 million, with 1,23 million deaths having been recorded.

It’s a fact acknowledged by Mr Svosve:

“While funeral assurers have fully met and are fully meeting all claims including those of Covid-19 victims, the number of fatalities from Covid-19 has not yet resulted in unusual claims for services from funeral assurers. However, in the event of a sudden increase in infections and subsequent deaths from Covid-19, there is a possibility of a run on claims on funeral assurers.”

With an effective vaccine or medication for the highly infectious virus yet to be announced, the risk of a second wave in Zimbabwe remains high (as recent events in Europe have shown).