The KCB Life venture was “mapped out to start swooping through the funeral insurance market and then expand into pure life insurance and other subsectors of the market”, it said in a statement.

The operation would enjoy a head start in “leveraging from an established financial co-operative rhythm founded on the back of an ambition” to establish a co-operative banking operation. KCB was en-route to become Khanya Co-operative Bank.

“We have established a functioning network of more than 200 people in and around the financial co-operative,” KCB steering committee member Moeketsi Nchoba said.

“We will be using that growing network to launch the mutual insurance operation, titled KCB Life. Simply put, our members will be our agents of launch and growth.”

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Nchoba said the main attraction of KCB Life was that it was set to operate on a model where members were essentially “owners” of the insurance scheme. This was allowed by the mutual insurance model, which “is big across the globe”.

“When you’re a member of a mutual insurance operation, you essentially own a portion of the operation based on the collection of your premiums without disturbing the insurance product,” Nchoba said.

“This becomes possible when you remove the corporate monster from the equation and replace it with the member interest,” he said.

The funeral insurance schemes which dominated the South African market were ruled by the corporate model. You had the premium payers who contributed into a pot of funds managed by a private entity.

“Our research tells us that the premiums are utilised as follows: About 30% goes towards settling claims/benefits, 20% to administration costs and reserves, 25% to incentives, and another 25% is claimed by private shareholders as profit.

“The 25% of premiums that is claimed by profits in private operations is typically distributed back to members as surplus in the mutual insurance model. And the member’s surplus can surpass the typical profit percentage (25%), because mutual insurance operations are unlikely to have bloated operational costs and incentives inflated by greedy executives who claim ludicrously high remuneration packages.”

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Consumers who wanted to escape “corporate greed” should consider the mutual insurance model. “KCB Life is set to serve them with a worthy alternative,” Nchoba said.

KCB Life was aiming at low- to middle-income earners first and initially via the funeral insurance market. “It sets out to deliver a global insurance novelty for the under-banked segment of the market,” Nchoba said.

“We are going to the funeral insurance market with a totally different fundamental. Our model seeks to transform this market by putting into the mix an investment angle. We do believe that this market is ruled by ridiculously expensive products informed by the predatory instincts of most operators.

“Our numbers are telling us that a significant portion of what goes into funeral cover should be reallocated into social assistance investment. We will do this without interfering with the anxiety factor that drives the funeral insurance market,” he said.

“We understand what drives people into expensive funeral covers. They seek comfort. We will bring to the market a product that takes care of the anxiety factor while doing something else, building an investment base. We will be killing two birds with a single stone with a funeral cover product that yields investment benefits,” Nchoba said.

– African News Agency