Insurance Brokers drive innovation in the funeral industry, says expert

Clinton MacDonald

Funeral brokers play a vital but often overlooked role in insurance innovation for the local funeral industry, which collectively conducts about 480 000 funerals a year in post-COVID South Africa.

Industry expert Clinton Macdonald, CEO of KGA Life, says South African funeral insurers would not have been able to adapt to the changing needs of customers to the degree that they have since the pandemic, were it not for the insights provided by the intermediaries who broker funeral policies. “Brokers are customer-facing, while insurers are not. Brokers drive customer-centric innovation and efficiencies in the funeral industry.”

Funeral product innovation is built on collaboration

Macdonald, whose company specialises in funeral policy underwriting and regulatory compliance, explains: “Brokers play a vital role in matching the exact needs of consumers to the myriad of available financial services products out there. In the funeral industry, the broker takes on the important role of working closely with the product provider – the funeral insurer – to help design fit-for-purpose funeral cover products. And in a market where the vast majority of funeral policy sales take place through intermediaries, the broker fulfills an essential role for the insurer.”

Intermediaries in the funeral insurance industry play a greater role in shaping the industry than brokers in other insurance categories, says Macdonald. “Given that most funeral policies are sold through intermediaries such as funeral parlours, burial societies and church groups, who are deeply entrenched in the community, they are best positioned to measure consumer needs and trends and feed this back to the insurers to guide product design.”

Personalisation trumps digitisation in the funeral business

While innovations in funeral insurance product design is influenced by rapid digitisation since the pandemic, Macdonald says digitisation still does not trump personalisation when it comes to creating new funeral products that customers want and need. “While digitisation of services is obviously part of the solution, consumers still demand a more personalised experience.”

“Intermediaries bring deep local knowledge. They are often very localised within their communities and build trust with customers on a level that the product providers simply cannot attain themselves directly. Working together, intermediaries and insurers can achieve much better outcomes than trying to compete.”

An example of local knowledge is Vuyo’s Funeral Services from Mamelodi in Gauteng. “Consumers needs may vary in terms of region, demographics or other factors. Highly respected local funeral services, like Vuyo’s, who are trusted by the community, have their finger on the pulse of consumer preferences. Thanks to insights such as theirs, funeral policies distributed through funeral parlours are constructed with the intention of the consumer in mind, for instance to use their policy benefits to pay fully for the funeral services.”

It all comes down to costs

Cost factors ultimately shape how funeral packages are designed, says Macdonald. “Sales and distribution of policies, and collection of premiums, are the greatest cost drivers in the funeral insurance business. Given that brokers are consumer-facing, they can play a major role in helping to innovate around these cost driving elements to help reduce the operational costs of provisioning funeral policies. In the end, cost is a factor that matters to the industry and its customers.”