RIP funeral cover: Covid causes long-lasting changes to the funeral landscape
While last week’s address by president Cyril Ramaphosa means that South Africans can once again pay tribute to their deceased loved ones with a larger gatherings (for now), the ongoing precariousness of the situation means that the traditions embedded in the cultural fabric of the continent will continue to undergo profound shifts - possibly forever.
While South Africa is diverse - with many different rituals, religious and cultural connotations when it comes to funerals - one thing all of us seem to have in common is that dignity in death is important.
Dignity usually costs money. Funerals are big business — according to a 2016 report by the South African Local Government Association (Salga), between 2009 and 2012, burial was consistently the preferred practice across all eight metropolitan municipalities. Another research paper, “Paying the Piper: The high cost of funerals in SA”, which analysed the funeral arrangements of almost 4000 people between 2003 - 2005, found that on average, households spent the equivalent of a year's income on an adult funeral.
Berniece Hieckmann, Head of GetUp — Metropolitan’s arm aimed at a younger, digitally-minded consumer — says that: “When people don’t have money for something, the need for that thing - especially when classed as a dignity need - becomes even more significant. This is partly why we, as a financial services provider, recognise funerals as extremely important in an emerging market context.”
If dignity is one contributing factor, it could be argued that status is another. ‘Wedding Celebrations as Conspicuous Consumption: Signaling Social Status in Rural India’, a 2004 research paper, made note of the ostentatious expenditure surrounding weddings in many developing countries.
The authors argued that, in holding lavish weddings, poor Indian families increased their status in the community, stating that “families clearly gain direct Utility from simply moving up the social ladder – a movement that lavish weddings help to bring about.”
“By that same token, in a South African context, funerals that do not meet societal expectations may result in those households losing social status,” Hieckmann says.
While citizens may be notoriously underinsured and not adequately prepared for eventualities such as retirement, funeral cover currently retains its place of importance - particularly given the increased awareness around illness and death that Covid-19 has brought with it.
The question is, how will this change to the funeral landscape impact funeral products into the future?
No (funeral) bells or whistles
“The very nature of funeral cover is that it is designed to pay out very quickly as there is urgency in giving the deceased a dignified send-off, and for this reason it does not entail much underwriting - either upfront or at claims stage, explains Hieckmann. “This speed of acquisition and claim payment does, however, usually come at a cost.”
However, the consumer purse has taken a knock. As a result, people may start taking out lower cover amounts or, more likely, with the changes to how funerals have traditionally been conducted, they may find that that now have additional cash left over after pay out, which could inadvertently help the family of the deceased - especially if unforeseen medical expenses were incurred.
As a result, financial services providers may need to redesign products to take this new landscape into consideration. “We expect to see a wave of funeral products that are designed for smaller, less lavish funerals, and which are, in turn, more cost-effective themselves.”
In addition, with consumers now experiencing a heightened awareness around death, several newcomers have seen the opportunity within emerging market insurance, resulting in a growing number of those insured, who are ‘over-exposed’ in terms of their funeral cover. “With consumers under increased financial pressure, a consolidation of cover will free up pockets of income,” adds Hieckmann.
The ascension of the younger buyer
Covid-19 had confronted all of us all with our own mortality — even South Africa’s youth. With many young people financially contributing towards — or even solely financially responsible for — their families, it would go to reason that many will now be responsible for purchasing this cover.
Hand-in-hand with increased interest from a more digitally-savvy consumer, comes an emphasis on customisation. “Younger consumers are more informed and therefore empowered when it comes to their financial choices, and want to be able to decide for themselves as to what is important when paying for, or contributing towards, a funeral. Their needs may not reflect those of their elders, and a level of flexibility will now need to be built into products,” says Hieckmann.
RIP to the middle man
Digital adoption has accelerated as the need for social distancing climbs. Clients are seeking funeral solutions that are clear, easy-to-understand and that can be bought online — at a time and place convenient to them – and without any undue sales pressure.
“Insurers therefore will need to supply clients with all of the information required to reach a purchasing decision about a product, without the cost and possible hard-selling bias often seen in traditional sales channels,” she concludes.