Management expenses eat into Funeral Assurers Technical Profits

Management expenses eat into Funeral Assurers Technical Profits

Funeral Assurance Companies posted a drop of 41% in their technical profits, as an increase in management expenses ate into their income, the latest Insurance and Pension Commission (Ipec) Funeral Assurance Second Quarter, 2017 Report shows.

By Tafadzwa Chidoori
The Funeral Assurance sector’s technical profits dropped  to $2,79 million from $4,67 million for the month ending 30 June, 2017.
According to Ipec the drop was caused by a  17 percent increase in total costs, which was mainly driven by a 33 percent increase in management expenses.
During the period under review, total costs were $16.4 million up from $14 million, while management expenses jumped to $9.7 million from $7,3 million.
Ipec encouraged Funeral assurers to rationalise their expenses to enable them to pay claims at the same time being profitable. Amidst reports that Funeral Assurers had outstanding claims amounting to $48 000 for the period under review. Of this $48 000, claims amounting to  $18 000 and $23 000, were aged between 0 to 30 days and 30 to 60 days respectively.
“Players are encouraged to rationalise costs to improve their profitability,” Ipec said.
According to the report net profit after tax for the period amounted to $1,57 million. The average return on assets for the industry was 2,46 percent, the industry recorded an average return on equity of 4 percent.
IPEC said this level of profitability is on the low side compared as compared to international benchmarks. And encouraged players to look for other avenues to find funds.
“Funeral assurance industry players should put in place strategies that will enable them to take advantage of opportunities that presents them including those in micro insurance,” read the Ipec report.
Meanwhile net premium written for funeral assurers grew by 13 percent to $80,27 from $70,85 million during the same year last year.

Doves (with 26% growth) and Ruvimbo (with 117% growth) were the major drivers of business written, as five funeral assurers registered negative growth.

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