Press Office Feature : Lion of Africa Life’s position on child grant policies
|Company:||Lion of Africa Life|
|Author:||Paul Myeza, CEO, Lion of Africa Life Assurance|
|Posted:||06 May 2016|
For cultural and religious reasons, there is a significant demand for funeral policies in South Africa and Lion of Africa Life believes that all residents have a right to a decent burial, regardless of their socio-economic standing.
For this reason, an extremely cost-effective product for low income and grant recipient households was developed to be able to satisfy this demand in a way that specifically does not exploit the poor.
Before the introduction of Regulation 26A, within the Social Assistance Act, 2004, funeral policies were sold to low income and grant recipient households by a host of different entities, many of which were not registered life assurance companies.
In order to provide this service a non-life company business was supposed to reinsure with a registered life company. This only served to add a layer of costs (often a significant layer) to the policies being sold.
In May 2009, Social Assistance Act regulation 26A was introduced, with the specific purpose of ending abuse of the sale of funeral policies to recipients of social grants.
Recognising the existing demand for such policies, the regulation introduced a cap of 10% of the grant and the deductions from the grant being made directly by the South African Social Security Agency (SASSA).
In this way, the restriction on one policy per grant recipient could also be implemented.
Lion of Africa Life believes that regulation 26A was an excellent move by the Department of Social Development.
Its introduction stopped the abuse of low income grant beneficiaries being exploited by unregistered funeral schemes.
It meant that they would no longer pay inflated premiums to unregistered entities that purported to be insurers but then used a registered life company as a reinsurer.
The unregistered entities would charge a premium over and above the actual insurance risk premium adding an unnecessary additional financial burden to anyone, let alone the most marginalised amongst our population.
Regulation 26A also introduced a mechanism by which the funeral premiums could be deducted at a lower cost than the traditional collection methods.
This mechanism also introduced consistency in the payment of premiums reducing the risk, to the policyholder, that the policy would expire and the benefit would fall away.
Perhaps the most important thing to note, is that the demand for policies exists. Poor people, as much as rich, need to bury their loved ones. Whether or not they receive a state grant, people are buying funeral policies.
There are various reasons for this, including but not limited to tradition and socialisation. The point, however, is that the broad population seeks funeral insurance cover.
The question is whether they get that through regulated, legitimate assurance companies or via unregulated providers at the risk of higher premiums and no recourse.
Regulation 26A solved this by stipulating that grant beneficiaries are restricted to one policy and the premium may only be 10% of the grant.
The most secure way for anyone, but especially society’s most vulnerable, is to buy a policy through a registered life assurance company rather than via a host of unregistered/unlicensed entities which results in higher premiums and no recourse.
Lion of Africa Life responded to this demand by creating a product completely suited to the lower end of the market. For only R30/month, a total potential rand benefit of R18,750 is payable; with up to 8 lives being able to be covered.
With a sliding scale for the premiums, the monthly cost for 8 lives would be some R80 to R100. We believe that this is extremely competitively priced and suited to this market.
In the absence of 26A and regulation, many of the families concerned would still buy funeral cover, often from unregistered providers without the protection and recourse of regulation 26A.
This ground breaking legislation has meant the poorest of the poor, who still have a need for these policies, can perform their last rites in a dignified manner, when the insured event manifests.
They can also do so while being protected in that they may not overspend on the benefit due to the legislation and centralised collection mechanism. These same people were previously targeted by sales people of unregistered insurers and were subjected to paying their premiums via multiple and onerous methods.
In the absence of 26A, we as a country would go backwards and do a serious disservice to the people of South Africa: people would not stop buying this important solution, they would just have to do it in the unregulated space.
In December 2015, the South African Social Security Agency (SASSA) implemented a moratorium, stopping the sale of funeral policies to child grant recipients. Since the moratorium was put in place, Lion of Africa Life Assurance has not sold or marketed any of these policies.
People receiving grants are not targeted and Lion of Africa Life Assurance is strongly opposed to abuse of South Africa’s poor and vulnerable. The policies are designed to satisfy a need in the most cost effective way possible.
It is without doubt one of the best value-for-money policies available in the market.
It is perhaps more concerning that the current system, which offers clear protection and benefits (a very cost-effective policy with legal recourse), may be impacted adversely. It is worrying that a real benefit available to the poor may be removed.
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