An approximately 20-meter-high wall with an advertisement for South Africa’s oldest funeral home, Avbob, hangs over people entering downtown Johannesburg. “Stand strong for our people. We are here for you. Since 1918”, one can read.
In the city center, which was among the sites hit by last week’s unrest, there are signs showing funeral blanket packages everywhere amid hawkers selling chicken kebabs, corn on the cob, electronics, fresh fruit, clothes and wigs. In a storefront, employees of the Two Mountains insurance company said its agents across town were handing out flyers with plans that included a “prince’s domed cherry coffin.” Across the street, a grocery store has a sign in the doorway offering funeral insurance for as little as R2 per day. The airwaves are inundated with commercials to cover funerals, and supermarket chains like Shoprite are bombarding customers with funeral aid offers to shop with them.
Just about everyone seems to be offering coverage for end-of-life ceremonies in South Africa these days, from small players like Two Mountains to the country’s biggest banks, cell phone companies and retailers. With Africa’s most developed country with one of the fastest rates of death from Covid-19 infections in the world, large swathes of the country are inundated with funeral insurance offers.
While protests last week following the incarceration of former President Jacob Zuma for contempt of court distracted attention from the rise in infections in the third wave of the pandemic, the high rate of The deaths in Gauteng, the industrial center that includes Johannesburg and Pretoria, are again cause for concern. Funeral homes fear they will run out of coffins. Officially, 67,080 people have died from Covid-19 in South Africa, but the excessive deaths – seen as a more accurate way to assess the impact of the pandemic – are about triple.
Elaborate burials are somewhat of a status symbol in South Africa, and the immense social and cultural pressure to ensure that a burial conforms to its station has spawned a thriving industry for funeral insurance. It is the most popular category in the estimated R708 billion country insurance sector. Research at Absa shows that there is no sign of this demand slowing down.
“Trying to raise money when someone dies is very difficult,” said Leigh Petersen, a 24-year-old who lost her job last year and has been looking for options to cover herself, her mother, his brother and his son. “Even though I’m young, I wanted my family to be covered because things happen unexpectedly. Coronavirus was also a cause I had funeral coverage more in mind.”
Even before the pandemic, planning a socially dignified funeral was a concern for South Africans. At 13% of the average annual salary, funeral costs in South Africa make it the fourth most expensive country in the world to die, after Japan, China and Germany. While many countries – from Australia and Canada to France – offer funeral coverage as part of life insurance packages, in South Africa it is a cultural imperative.
“If they have a rand to spend, they spend more on the funeral than any other product we currently have,” Old Mutual CEO Iain Williamson said of the company’s mass foundation offerings. . Eugene Strauss, managing director of Absa’s life insurance group, says funeral coverage is most clients’ main driver for selling other life insurance policies.
From a belief that the dead are spiritual ancestors who influence the fate of the living to a feeling that the final farewell reflects a family’s position in the community, the pressure to have a flashy funeral is immense in Africa. from South. In a country where around a third of the working-age population is unemployed, this hits the poor particularly hard. People often borrow to meet funeral police payments, according to a report released last year by Black Sash, a human rights organization.
“The cost of funerals in South Africa is not determined by wealth,” said Pieter van der Westhuizen, managing director of Avbob, the country’s oldest mutual funeral society. “The cost is determined by cultural expectations. Each community has its own idea of what a funeral should look like.”
“Send the lifestyle”
Funerals in the country can be opulent. Red carpets leading mourners to the tomb, flowery arcades, poster-sized photographs of the deceased, fancy tombstones and a lavish feast – with several sheep or a cow slaughtered and served with rice and vegetables – are often part of the program.
At Vuyo’s funeral in Soweto, a high-end funeral can cost around R200,000, with a high-quality casket, elaborate flower arrangements, limousines with drivers, hall, catered feast, music, screens television, professional performances and other services. A basic insurance policy for a standard funeral package with around 15 people at R 5,000 per person costs around R 185 per month and provides no-frills service with groceries. She can be improved with something called “inkomo”, or cow, and pays for the meat to feed the bereaved.
The owner of the funeral home, Vuyo Mabindisa, says he’s happy to have expanded the funeral business started by his grandmother in 1967 to include funeral insurance 15 years ago. “I was able to sell more policies than I could bury and I started to turn to financial services,” said the 50-year-old, whose company now has 30,000 primary policyholders. “We don’t sell funerals; we are not selling death, ”he said. “We are giving a lifestyle farewell.”
The importance of funerals gave birth to a large funeral industry consisting of funeral directors, mortuaries, cemeteries and crematoriums, manufacturers and suppliers of funeral products, transporters of human remains and embalmers. Although there are big players in the market like Avbob, the industry is mostly made up of smaller companies serving very local markets. The same goes for funeral insurance, and the segment’s explosive growth has come with its fair share of abuse, raising fears that unscrupulous service providers are preying on the financially illiterate.
According to life insurer’s forensic services, the company lured criminals by taking out covers for people who don’t exist, or buying and renting corpses to get fake death certificates. It has also attracted illegal insurers or exploiters who take advantage of the poor or the uneducated with clauses they do not always understand, allowing service providers to repudiate claims. Attempts to generate new business can sometimes trap unsuspecting victims in inappropriate policies.
“Death is a business”
“Death is a business… and township funeral directors provide funeral cover with fun rules that are very questionable from an ethical standpoint,” said Jonathan Walton, senior paralegal at Black Sash. Regulatory authorities “are not doing enough to protect poorer households from exploitative business practices.”
Even established businesses have not escaped scandal and ignominy. In 2019, Old Mutual suffered a blow to its reputation when beneficiaries of a funeral insurance policy brought a corpse to one of its branches to expedite the payment of a debt. The family were outraged that the rounds of assessments meant the rituals could not be observed in a timely manner. African Lion Life Insurance Company targeted poor parents by putting in place deductions from their family allowances to cover funeral costs. The case triggered new regulations preventing deductions from children’s allowances.
Yet with locals eager for more funeral insurance – even if they can’t always afford it – new entrants offering services are appearing every two months. Margins are low, premiums are low and the battle for business is fierce.
“There is a lot of competition and everyone considers this to be the place to be,” said Warwick Bam, head of research at Avior Capital Markets.
With profit margins on funeral insurance ranging between 3% and 7%, according to Melusi Baloyi, an actuary, volume is key. So being cheap and flexible is what many recent entrants such as Capitec Bank and telecommunications giant Vodacom are highlighting in their offerings. Vodacom sells R2,500 coverage for R3 per week, while Capitec, which now sells around one million policies per year, charges R25 per month for R5,000 coverage purchased through its digital channels. The bank made 650 million rand on its funeral proceeds in the year ended in February.
Despite all the rush to get a share of the business, high payments during the pandemic can hit some businesses hard, Kuben Naidoo, deputy governor of the South African Reserve Bank and CEO of the Prudential Authority, said in an interview. .
“If the third wave has as high a death rate as the second wave, I think you can have many insurance companies – the bigger ones should increase the provisions – but many of the smaller ones that sell funeral plans. can be underwater, ”he said. noted.
– With the help of Khuleko Siwele.