Funeral Policies Go Up As The Cost Of Death Rises Beyond The Reach Of Many

THE year 2020 can easily be named the year of COVID-19. The deadly disease, which is caused by coronavirus, was first reported in China’s Wuhan province towards the end of 2019 and was only declared a pandemic by the World Health Organisation on March 11, 2020.

To date, over 20 million cases have been confirmed globally with over 700 000 people succumbing to the pandemic. Although the disease only arrived in Zimbabwe in March, the number of infected people rose dramatically from less than 50 in May to nearly 5,000 confirmed cases in August with just over 100 deaths.

The pandemic has sharply reminded us all of the fate of all humans – that at some point we will all die. Many across the world today live in fear and panic, unsure of what tomorrow holds. Already many changes have taken place to our normal lives, such as working from home, wearing of face masks and learning online, among other things in what many have termed the ‘new normal’. Economies around the world are collapsing due to the shocks of the pandemic, with companies closing, jobs lost and markets crashing.

Zimbabwe has not been spared in the midst of all this global pandemic.

Prior to the pandemic, the country’s economy was already battling many issues characterised by a depreciating local currency, which was hastily introduced in July 2019 in the absence of strong fundamentals necessary to stabilise a new currency.

The Zimbabwe Dollar (ZWL) has since depreciated from 25:1 to the United States Dollar (USD) to 80.5:1 at the current auction rate that was introduced in July 2020 following a period of a fixed exchange rate.

Consequently, inflation, which is largely exchange-rate driven, is now trending at about 32% month-on-month as of June 2020, with annual inflation at over 700%.

The above scenario paints a picture of doom and gloom for the ordinary Zimbabwean. With the country’s long neglected healthcare delivery system further deteriorating due to lack of basic equipment and medicines,  and the majority of doctors and nurses having gone on strike, the risk of death has unfortunately increased, with many unable to afford basic healthcare.

When a person dies, inevitably certain expenses are incurred such as mortuary services, the purchase of the coffin, transport for mourners, food and many other costs. Taking these into consideration, just a basic funeral nowadays will cost USD1 000 to ensure the proceedings run smoothly.

This easily translates to over ZW$80 000 at the prevailing auction rate, or just over ZW$100 000 at the rate that most service providers will be charging for their goods and services.

What does this mean for the ordinary Zimbabwean?

It means the majority of Zimbabweans are at risk of being unable to afford a decent burial for their loved ones, or of leaving behind a huge funeral debt on their surviving spouses and families when they pass away.

One way of mitigating this risk is to get a funeral policy.

These come in different types which can either be a cash policy or a policy that gives the actual service needed, such as mortuary services, procurement of the coffin, the funeral hearse and other accessories. One would then be paying fairly affordable premiums on a monthly basis, depending on the benefits offered by the policy. One’s monthly premiums would also depend on how many beneficiaries one adds to the policy.

For example, it is common that one would cover their spouse, children, parents and in-laws – generally known as the nucleus family. In an African set-up, culture dictates that family members should contribute some finances in the event of death of an uncle, aunt, grand parent, and so forth. These would normally be covered on the policy as extended family members.

To augment the funeral policy benefit some companies would add ‘riders’ or additional benefits, such as a bus for transport, a tombstone and groceries. This means premiums would range from as little as ZW$50 per month to as high as ZW$5 000 for policyholders.

On the service provider side, the hyperinflationary environment has also made it difficult for many providers of funeral assurance. Operational costs have continued to increase month-on-month.

For instance, fuel costs for transportation services, the cost of production of coffins, and chemicals for mortuary services, among other things, are constantly rising.  This has resulted in many of the funeral assurance and life assurance companies regularly reviewing their premiums for the various packages they offer, to ensure sustainability and business continuity.

In the short to medium term, economists say inflation is likely to continue to surge as local production remains subdued, causing an over-reliance on imports, thus exacerbating foreign currency shortages in the country. Government spending, meanwhile, remains high and investor confidence is still low. This, coupled with the COVID-19 pandemic, means the business operating environment in the life assurance and undertaking business is going to remain tough.

Many sectors of the economy are expected to contract this year, pointing to further deterioration of the economic environment, with some predicting either a convergence of the auction rate and the so-called parallel market rate or full dollarization of the economy.

This could signal stability, which is critically needed for the insurance industry to survive and for policy holders to breathe a sigh of relief.

The article first appeared in The Standard newspaper.

 

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