While insurance companies in the US, UK and Europe make the bulk of their money covering cars, homes and other material goods, their African counterparts are cashing in on the continent’s custom of hosting pricey funerals.
In Africa, big, dignified burials are signs of prosperity, and small, restrained ceremonies are just the opposite. So Africans stretch their finances, often to unseemly ends, to fund funeral insurance so relatives can have a proper burial.
On average, funerals in Africa cost a staggering 40% of annual household expenditures, according to Foreign Policy, and include elaborate coffins, food for guests, requisite new clothing, and transportation to and from the ceremony. Funeral insurance hedges their ability to cover expenses. At Sizo Funeral Directors, a small funeral-insurance company based out of Soweto, South Africa, the cheapest package affords a $500 funeral, and covers up to 14 people for as little as $12 dollars a month. Larger packages run upwards of $50 dollars a month, and often much more. Consider that in South Africa, the continent’s wealthiest country, non-farm workers make less than $1,500 a month. Funeral insurance policies tend to be bought on behalf of households, meaning that many Africans are covered for large portions of, if not most of their lives.
High death rates and low savings levels have made it easy for African insurance companies to swoop in. In South Africa, the continent’s biggest economy, funeral premiums totaled nearly $500 million in 2011, according to the country’s Financial Services Board (FSB). Global bank Standard Chartered is seeing double-digit growth in its funeral insurance business in five African markets, reports Reuters. With mortality rates falling, opportunities to capitalize on the cultural trend will only grow, as insurers will likely see customers locked into policies for longer.
Unfortunately, it’s Africa’s poorest who are driving the industry’s growth.