Funeral Policy Reform: No More Overcharging by Funeral Policy Providers
The Insurance and Pensions Commission (IPEC) has implemented new regulations that limit the perpetual premium payments by funeral policy holders, which have been a subject of complaints from policyholders over the design of local funeral policy products and practices of funeral assurers.
The Sunday Mail reports that according to the new regulations, funeral policy subscribers will now pay premiums of up to US$6,000, or the equivalent in local currency before their policies are considered fully paid up, and most premium funeral policy payouts will not exceed this ceiling.
“Each funeral policy covering a single life shall be limited to a maximum sum assured not exceeding an amount of US$6 000 or the Zimbabwe dollar equivalent using the prevailing interbank exchange rate,” reads part of the directive.
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Regulation Changes and Limitations
“The funeral directive is also issued in order to improve the governance structures and systems for funeral business underwriters for the protection of funeral policyholders,” said IPEC Commissioner Dr Grace Muradzikwa. The directive will come into effect on July 1 and will limit annually renewable policies to three years. Additionally, “all underwriters providing funeral assurance products [must] comply with Section 60 (1) (a) and (b) of the Insurance Act (Chapter 24:07), with regard to grace periods allowed before a policy lapses.”
“Where a policyholder has continuously paid premiums for an existing secondary policy and met all the terms and conditions of the policy, he/she is entitled to a cash in lieu of service that is equivalent to the sum assured of the policy,” adds the directive.
IPEC has also moved to limit the period of all annually renewable policies.
“Going forward, all annually renewable policies will have a limit of three years after which they become long-term policies with a maturity date and shall have a term not exceeding 25 years from the date of conversion from an annually renewable policy to a long-term policy,” reads part of the directive.
“The policy shall mature at the end of the premium paying term.”
The Zimbabwe Association of Funeral Assurers (ZAFA) president, Arthur Makasi, has stated that the industry will comply with the directive, even though some of the association’s submissions were not considered by IPEC. The balance of complaints related to issues of delays in settlement and unsatisfactory service.
Impact on Policyholders
With funeral insurance accounting for around 80% of all insurance policies in Zimbabwe, the directive is a welcome relief for policyholders who have suffered from arbitrary policy terminations and high penalties for policy terminations. The new regulations will compel funeral underwriters to pay out a full sum assured in instances where an individual has multiple policies, and funeral cover provided under group life assurance schemes will not be interpreted as multiple funeral assurance policies.