Rural burial schemes could teach insurers some ubuntu

Can our financial services companies help our rural gogos strengthen their burial schemes without compromising the values of ubuntu embedded in those systems? This was a question that arose as we prepared to lay my grandfather in his final resting place.

As we busied ourselves with the tasks at hand‚ two grannies from the Tshezi clan‚ clad in aprons and doeks‚ arrived at my grandfather’s homestead in the deep rural area of Mqokolweni in Tsolo in the Eastern Cape.

A cousin summoned me to go and meet them. As I wondered what business I had with the gogos‚ one of them produced a huge bundle of cash from her apron — almost R10000. I was told many thousands more would be coming‚ but for now I should hold on safely to the stash.

I asked what the money was for and where it came from. One of the grannies responded: “It is from our community burial scheme‚ my son”.

Despite the grief in the family‚ my excitement mounted as I enquired how the scheme operated. It made me happy as it demonstrated how rural people had set up systems to look after each other.

What impressed me was that this rural scheme had paid faster than many well-known insurers that provide funeral cover.

One of the gogos said the scheme had been operating for more than 20 years and had helped bury a number of people. She said when they were young‚ they paid R5-a-month in premiums.

Over the past two months the scheme‚ administered by the rural people themselves‚ had paid out about R84000 to bury seven people‚ including my grandfather.

As a financial services writer‚ I naturally asked what the window period would be before someone was eligible for a claim. The gogos said no such window existed – all one needed was R30-a-month to contribute to the scheme and if you died, your family would get about R12000.

This means the scheme received contributions from about 400 people. So what would happen if a long-standing member defaulted on premiums?

The answer was that if the situation was tough for some‚ people in the scheme would contribute the amount on behalf of those who really could not afford it‚ especially those who had retired and were very old.

For me‚ the lack of a window period and the support system for those who could no longer afford premiums, showed that the values of ubuntu were embedded in this rural scheme.

The issue of a window period has always bothered me. No matter how long you have had a policy with certain providers‚ if you change to another company‚ you will still face a three-month window period. To people who have contributed for years‚ this smacks of anti-competitive behaviour.

The funeral cover business is one of the stickiest‚ not because of competition and products‚ but because people are afraid to change to something better and more affordable. The fear of changing is partly due to this window period.

People worry that if they die soon after changing to a cheaper insurer‚ they will not benefit.

Really‚ this can’t be correct!

With developed insurers‚ people can pay for death benefits for a number of years and‚ if they stop‚ they lose all the money they paid. For the past six years‚ I paid more than R30000 for death and disability benefits. I was told if I changed insurers‚ I would lose all the money I had contributed. That can’t be fair. There is no ubuntu at all there! I think the National Treasury really needs to look into this.

Many insurers are targeting the low-end market‚ encouraging people to switch from community-based rural schemes. Although this is happening under the pretence of financial inclusion‚ people are being offered products that are out of touch with the schemes in their rural environment.

I agree the underwriting models could be improved to make rural schemes better.

But rather than replacing burial schemes‚ established insurance players should be working with these and help them improve their models, while retaining their communal values. Established firms should be duty-bound to help the rural schemes function better.

Banks could play a role in helping rural schemes generate better interest from savings. At the moment‚ rural people are given little interest at best – sometimes nothing. Perhaps some advice on how to invest the funds safely could help retain the schemes.

Phakamisa Ndzamela is a finance writer. This article was first published in the Business Day

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