INSURANCE COMPANIES ‘SHUN’ ELDERLY FUNERAL COVER TENDER

MBABANE – Funeral cover insurance companies seem to have shunned government’s elderly funeral cover tender.

Out of 191 insurance and retirement funds entities registered with the Financial Services Regulatory Authority (FSRA), only five showed interests in the tender to provide funeral cover services to the elderly. By showing interest, they went to enquire about the terms and conditions of the elderly funeral cover from the Deputy Prime Minister’s Office, but only one showed keen interest in providing the services.

The elderly funeral cover was announced by His Majesty King Mswati III during the opening of the fourth session of the 11th Parliament. Minister of Finance Neal Rijkenburg announced government’s budget of E20 per month, which would go towards the funeral cover for each elderly.

On Tuesday, DPM’s Office Principal Secretary (PS) Melusi Masuku announced the official operation of the funeral cover. He mentioned that senior citizens would be covered for E3 000 for funeral costs, of which the payment process would be conducted by the Sincephetelo Motor Vehicle Accident Fund (SMVAF).

Questions

There were a lot of questions regarding why government considered a E3 000 cover, and why SMAVF was roped in. The PS had explained that MVA already had a running system that was processing funeral cover payments. Last year, government had invited insurance companies that offered funeral cover to forward their applications.

However, some well-established insurance brokers, who spoke to this reporter on condition of anonymity, mentioned that absorbing higher numbers of a high risk age group would have been a bad business bet on them. They said they had initially shown interest but the numbers (of the elderly) and the amount that was put forward by government placed them at a risk of failing in their obligation.

“We consulted actuaries who advised otherwise,” said the officer. One officer added that in most cases, an elderly person could be added as a beneficiary to an existing member but should not be above the age of 55 years. “You should note that as you get older, insurance or policy premiums increase,” added the officer. The PS also stated that only five companies came to enquire about the services but a majority of them were sceptical, hence only one returned and showed interest in the tendering process.

“The age group is very risky in the world of policies. The insurance companies do not have appetite to cover them,” he said. While there were running back and forth with starting the elderly funeral cover, Masuku said they looked for an interim solution hence the partnership with SMVAF. He explained that after hitting a snag with local funeral cover providers, they were advised by specialists in the field to form a fund that would fund the cover. He mentioned that there were laws that needed to be followed before fully establishing the fund which included Parliament approval.

“We did not want to delay the service, we felt that we should continue, pending regulations of the finalisation of setting up the fund by government,” he said. Despite not working for the policy providers, Masuku said it was also a gamble for government too. He explained that the country had about 80 000 senior citizens who were beneficiaries of the elderly grant, thus somehow making the direct beneficiaries of the funeral cover. He said the waiting period in funeral covers put government at risk of losing money should a larger number of the senior citizens die within the waiting period.

Qualified

“Supposedly, government injects E20 million in one year and 200 die; government might lose a lot of money because they would not have qualified for the cover. There is no value for money. We sat down with the players in the insurance world and advised government to establish a fund which is a decision the ministry took,” he said.
 When asked when the interim programme would end and if the cover would increase, he said it would all be determined by the formation of the fund.

“I cannot be sure how long the interim programme will last since we still have to get Cabinet approval,” he said. The PS said they also needed to engage actuaries who would conduct proper calculations that would determine if the fund would be able to pay a higher cover and still be sustainable.

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