Insurance regulator worried about outstanding funeral claims as they surge by 300 percent

Funeral assurers reported a 6 percent increase in gross premium income to $38.6 million in the full year to December 2016 from $36.5 million previously as a result of new business arising from mobile insurance, according to the regulator.

The Insurance and Pensions Commission (IPEC) said in a report based on direct funeral insurers only, excluding funeral business underwritten by life companies that corporate lines generated 40 percent of gross premium income while personal lines generated 60 percent, reflecting a surge in demand of funeral cover in individual clients.

Claims paid by funeral assurers increased by 26 percent from $9.5 million in 2015 to $11.9 million.

Despite an increase in claims paid, total outstanding claims for the year under analysis increased by 300 percent to $166 000 from an amount of $41 000 previously.

“This is a serious compliance issue which also has reputational impact to players more so given the urgent nature of funeral assurance claims. The Commission expects funeral claims to be settled as immediate as possible so that the policyholders get funeral assistance, as funeral policies are designed to provide funeral services”, read the IPEC report.

Cell, Foundation and Passion funeral assurers with capital of $704 000; $863 000 and $808 000 respectively were non-compliant with the minimum capital threshold of $1.5 million as at December 31, IPEC said.

Underwriting profit rose 54 percent to $10.7 million from $6.97 million reported in the preceding year.  

Total  assets of the funeral assurance industry increased by 20 percent from $51.4 million in the previous year to $61.8 million.

Despite this increase in assets, the prescribed asset ratio at 0.5 percent remained far below the minimum threshold of 7.5 percent. 

Total capitalization of the industry increased by 26 percent from $30.378 million in the preceding year to $38.3 million.

The increase in capitalisation was a significant improvement relative to a 2 percent growth at the end of 2015 from $29.086 million in 2014, a position that gives more security to policyholders.

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