Presentation to the Portfolio Committee on Finance: Hearing on Funeral Benefits Schemes

This presentation studies the hearing on funeral benefit schemes made by FinMark Trust to The Committee on Finance of South Africa. The presentation discusses:

• The main features of FinMark Trust;
• The backdrop to review 1, which found that funeral cover is one of the most important markets in South Africa;
• The backdrop of review 2, completed by Genesis Analytics, which identified key problems in assistance businesses;
• The dilemmas faced by regulators and legislators.

The review studied the market and the current regulatory framework:

• The market:
  • A large, vulnerable, low-income market with substantial low-income exposure;
  • A huge amount spent on funerals every year;
  • An insensitivity to prices;
  • Multiple cover from multiple providers;
  • Insufficient and burdensome regulation.
• The current regulatory framework that included:
  • Institutional vs. functional regulation;
  • LT Act and Friendly Societies Act;
  • Requirements of the LT Insurance Act;
  • The position of burial societies, funeral parlours, administrators and formal insurers.

The review recommended:

• A dedicated funeral insurance license;
• An appropriate regulatory regime for societies;
• A closer cooperation between regulatory bodies;
• Consumer education;
• Three critical checks to test:
  • Regulatory consistency and actuarial soundness of principles;
  • Implications of proposed changes on the existing market;
  • Attractiveness of the proposed new framework.