Practically all forms of insurance in South Africa are contracted on the same lines as in England . Only funeral assurance developed solely in South Africa . In its original form the actual funeral instead of a cash sum was provided upon the death of the assured. According to the Insurance Act life insurance that provides a benefit in value and not necessarily in cash is regarded as funeral assurance, provided that the total value does not exceed 1300. In practice the majority of funeral assurance policies are taken out to provide funerals. Some policies provide for both cash and a funeral, and there are some that even include mourning clothes and tombstones. Funeral assurance may be compared with industrial insurance in that it involves fairly small amounts, but no obligation rests upon the funeral assurer to collect premiums at the homes or places of work of policyholders. Upon each payment he has, however, to provide the policy-holder with a receipt containing certain information.
Under all policies issued since 1944 the policy-holder automatically has the option of a funeral or payment in cash. In the majority of cases, however, claims are for actual funerals, and the public expects the funeral assurer to be in a position to arrange for the funeral. Most funeral assurers therefore have the same responsibility as undertakers, and the majority of claims under funeral policies are carried out by undertakers financially associated with funeral assurers. A number of smaller funeral assurers do not have such financial agreements and enter into contracts with undertakers to carry out funerals required under claims.
Assurers are prepared to provide such a funeral, but often one that costs more is preferred. In such instances the relatives of the deceased have to make an additional cash payment. The greatest problem affecting funeral assurance is rising costs. Usually the assurer could avoid this by paying out a cash sum, but his reputation will suffer if he cannot at least provide a minimum funeral. The assurer has to provide a service purchased with depreciating currency. To provide for subsequent losses, he makes dual provision: in the rate of premiums and by means of suitable investments. Perhaps as a result of funeral assurance, funerals are generally cheaper in South Africa than in other countries with a similar standard of living. The establishment of American funeral assurance companies on the same lines as those in South Africa is an attempt to counteract the high cost of funerals in that country.
Funeral assurance companies originated from mutual aid societies providing funerals for members of societies that had contracts with certain undertakers so that members could provide for their funerals before their decease. This meant that the undertakers were assured of business and indemnified against bad debts. It is not possible to determine the date of the establishment of the first funeral society. Mutual aid societies that contracted for undertakers’ services to a greater or lesser degree already existed in Cape Town in the first half of the 19th century. Societies associated with undertakers were active in the Transvaal shortly after the Second Anglo-Boer War. Societies of these two types gradually acquired a greater similarity of function. Mutual aid societies wanted to be assured of the services of undertakers, and even in the early years close co-operation existed between such societies and undertakers. Several mutual aid societies established their own funeral parlours. On the other hand, independent undertakers found that the public had increasing confidence in their funeral funds if these were controlled by reliable trustees. The pattern thus evolved was that of separate funeral funds with their own managements, but somehow associated with specific undertakers.
The movement gained strength rapidly after the influenza epidemic of 1918 when the need for funeral assurance was universally experienced. One o£ the best-known societies, established in Bloemfontein in 1921 by H. H. van Rooijen, is the Afrikaanse Verbond Begrafnis-Onderneming Beperk. The Insurance Act (No. 37 of 1923) unintentionally aided the movement in the Cape Province. An old Cape law had required Treasury deposits by all funeral funds, but this was not included in the new act passed by the Union Parliament. Attempts by the Senate to include funeral funds were abandoned when the Minister promised that legislation controlling all aid societies would soon be tabled – but this did not happen till 20 years later.
After 1920 the industry grew rapidly, and in 1937 several hundred funeral funds existed, but few of these had adequate reserves to meet obligations. Serious cases of inadequacy of funds did not occur, but the situation was potentially dangerous. It was thus decided that the Government would incorporate funeral assurance in the insurance Act of 1923. Legislation was not immediately introduced and despite representations by the industry for a separate law on funeral funds, these were not included before the insurance Act of 1943 (Act 27 Of 1943).
This caused many problems. Before the passing of the Act in 1943 Dr. M. S. Louw suggested to a committee of the House of Assembly that funeral assurance and undertaking business be transacted by separate companies, since funeral assurance is naturally the business of a large company, whilst undertaking is an essentially personal service. As he had predicted, the small-time businessman lost his place after the new law had been passed. In 1945 there were about 80 registered funds; in 1965 only about zo financially independent funds existed. Of these the four largest controlled at least 85 % of the industry. Since all these companies are associated with undertakers, the small, independent undertaker is also gradually losing ground.
Funeral assurance is mainly transacted by organisations controlled by Afrikaans-speaking people. The biggest is Homes Trust, a company which originally issued only industrial insurance. In 1935 it started selling funeral assurance in order to compete with funeral societies. Avsos developed from a Bloemfontein cultural organisation. SAFFAS (South African Federation of Funeral Assurance Companies) is third in size. About 30 small funds belonging to individual enterprises in the Transvaal amalgamated to form this federation. Fourth is the Funeral Assurance Group, formed by the amalgamation of about 12 small Cape funds.
Growth of funeral assurance in South Africa:
|*Year||Premium income||Funeral funds||Claims paid|
*Figures refer to statements for financial years ending in the relative calendar year.
BIBL. Reports of Select Committees on Funeral Insurance (1937) and the Insurance Act (1943); Annual reports of the Registrar of Insurance; E. Buys: Triomf vnn ‘n reddingsdnnd (1955).
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