Mutual values

The extent to which the cost of a funeral places a family’s financial health at risk was identified by AVBOB more than 100 years ago. The informal society that it was in 1915 evolved rapidly after the modern world’s deadliest epidemic, the Spanish flu, ran rampant concurrent with the end of World War I in 1918. The thousands of deaths left in its wake changed the focus of the burial society, leading it (in 1921) to acquire a bankrupt funeral undertaking to serve its then 400 members, and in 1951, with the passing of a private act, its transformation into AVBOB Mutual Assurance Society, the largest such organisation in Africa.

Focused on the sensitivities related to death, AVBOB’s three main service offerings serve to ease the financial burden on mourning relatives; be that through its underwriting of life and funeral insurance cover as well as funeral organisation from more than 320 branches countrywide, or its AVBOB Industries division, based in Bloemfontein, which manufactures coffins, wreaths and other funeral-ware. According to CEO Frik Rademan, AVBOB’s policyholder base has grown exponentially over the decades. ‘After introducing mutual assurance, our membership grew significantly from 24 000 in 1936 to 80 000 in 1951. In 2009 we milestoned with our millionth policyholder. And, proudly, by our centenary year in 2018, we had topped the 2 million policyholders mark, with more than 6 million lives covered by the society.’

In being a mutual society, AVBOB has no shareholders, instead it shares surplus profits directly with its policyholders in the form of special bonuses and free funeral benefits. ‘This has been a key differentiator for AVBOB,’ says Rademan. ‘Over the past 11 years alone we have shared ZAR10 billion with our policyholders.’ It achieved this, largely, through the Free Member benefits offering, terms and conditions applicable, to the value of ZAR16 000. The member benefit is paid to policyholders over and above the insured value of a policy, inclusive of free transportation of the deceased within the borders of South Africa, and an additional ZAR2 500 cash upfront to assist with funeral expenses on the condition that AVBOB Funeral Services conducts the funeral.

In August last year, AVBOB declared ZAR3.5 billion as a special centenary bonus to its members by means of a new feature, the AVBOB Reward Account (ARA). ‘Our members can now claim the funds allocated to their ARA in cash after the main insured individual reaches age 65, subject to the policy having been in force for at least 10 years, and if the policy was in force as of 30 June 2018,’ says Rademan. ‘Every qualifying member is therefore eligible to receive their fair share of the ZAR3.5 billion while still alive, but in the unfortunate event of their death, the full ARA balance is paid to the specified beneficiary [or beneficiaries].’

As with most companies weathering the difficult economic climate in South Africa, AVBOB is confronted with complex challenges. ‘We face rapid technological changes, shifts in customer behaviour and growing competition from new market entrants,’ says Rademan. ‘The South African funeral services industry is characterised by a large number of micro, small and medium-sized enterprises serving local markets. ‘Because the sector is not regulated, undertakers are not required to register with industry bodies. Informal operators are therefore becoming widely supported by an indeterminate number of stokvels and burial societies.’

Conversely there exists a high level of regulation in the financial services sector that affects AVBOB’s insurance division. ‘Regulatory changes create huge disruption, impacting on cost, price and returns for our policyholders,’ he says. Be that as it may, AVBOB is firmly committed to compliance with set regulatory frameworks. AVBOB’s credibility comes from its membership of the National Funeral Directors Association, which sets the highest standards for its members, and it is a member of the Association for Savings and Investment South Africa. In falling under the financial services sector, AVBOB is regulated by the Prudential Authority and Financial Sector Conduct Authority, and complies with the requirements of the International Financial Reporting Standards as well as the Solvency Assessment and Management, and Own Risk and Solvency Assessment models.

AVBOB overcomes current market challenges by exemplifying the benefits of being a true mutual. ‘This allows us to create real policyholder value compared to other insurers that are more concerned with creating shareholder wealth,’ says Rademan. ‘Mutuality also gives us a very strong base from which to explore special bonus benefits and extend our free funeral options.’ Its agility and focus on serving its policyholders have set a standard of excellence that has, over the past three years, seen AVBOB notch up a number of awards. These include winning the long-term insurance, and the funeral/burial service industries categories of the Ask Afrika Orange Index awards for three consecutive years, from 2016 to date. AVBOB was also certified by the Top Employers Institute in 2018 and 2019, while at the same time winning Kasi Star Brand awards for two years running.

The adage ‘sharing is caring’ was further acknowledged when AVBOB – through its marketing agency BRAND et al – won four Prism awards for the AVBOB Poetry Project last year. Rademan explains that the organisation’s CSI efforts are heavily directed at literacy. ‘As strong as our commitment to policyholders is our passion for improving literacy in South Africa,’ according to Rademan. ‘We are actively engaged in the communities in which we operate. To date we have donated 52 of 60 container libraries we pledged to underprivileged schools, worth some half-a-million each. We have also pledged to invest ZAR150 million for the refurbishment and upgrade of rural schools in partnership with the Department of Basic Education, with ZAR15 million of that allocated to the upgrading of sanitation systems and the eradication of pit toilets in six Mpumalanga schools.’

It doesn’t stop there. AVBOB invests into other secondary community projects aimed at social upliftment. The AVBOB Trolley Libraries is one such example, providing a number of mobile wooden bookshelves manufactured by AVBOB Industries. And then there’s poetry. ‘Our groundbreaking national Poetry Project comprises a dedicated website and a prize-winning poetry competition, which embraces all 11 official languages. We’re proud that it has enabled thousands of aspiring and established poets to receive recognition for their craft.’

The internationally acclaimed Mzansi Youth Choir has also been adopted by the AVBOB Foundation, which sponsors the 60 choristers. Established in July 2003, the choir provides talented underprivileged teenagers and young adults with the opportunity to perform locally and abroad, most recently at the Arab African Youth Forum in Egypt.

Such generosity continues the legacy of AVBOB as a credible and beloved South African brand but it has no plans currently to expand beyond the country’s borders, although it already has a significant presence in Namibia, with more than 20 branches.

‘Our strategy is to continue growing our national footprint though an extensive expansion programme in accordance with our mandate to get even closer to our policyholders. In this unpredictable economy we are continuously looking at new ways of doing things – and doing them differently,’ says Rademan. ‘One thing that will stay unchanged is our commitment to the delivery of exceptional customer service at every level of the business.

‘At AVBOB we take a hands-on approach to everything we do, believing in promoting a role culture as opposed to a task culture. On the basis of our One AVBOB approach, every person in the organisation is expected to roll up their sleeves and do whatever is necessary, whether or not it is mandated in their job description. ‘We are dedicated to ensuring that every encounter with our stakeholders is a positive and memorable experience and continuously innovate and invest in new technologies to ease the burden on our clients, most especially when they are in an emotional and vulnerable space. These are the things that count and together they have contributed greatly to our success and progress over these past 100 years.’