More burial policy grief

2010-10-02 10:35

Long-term insurance deputy ombudsman Jenniffer Preiss is concerned about the increase in the number of ­complaints related to funeral insurance in the first eight months of this year ­compared to last year.

Between January 1 and September 30 this year, the Insurance Ombudsman ­received about 1008 complaints related to burial policies, which make up about 22.9% of all the complaints ­received.

In the same period last year, ­complaints about funeral insurance ­constituted about 20.3% of all ­complaints recorded by the ­ombud.

“The most common complaints we ­receive about funeral policies are claims being refused for various reasons. ­For example, if the deceased died in the waiting period, or the ­deceased did not qualify as being insured in terms of the policy ­definitions.

Preiss said: “We also receive a number of ­complaints about administrative ­errors and poor communication.

“Some ­complaints about benefits being paid late.”

FinMark Trust estimated that there were at least 4.2 million holders of ­funeral policies, who spend about R5 billion yearly on funerals.

But due to high levels of ­financial illiteracy low-income consumers are often vulnerable to abuse.

The ­increase in complaints to the long-term Insurance Ombudsman are an indicator of problems faced by ­consumers.

Preiss told Hotline that about 51% of funeral cases were resolved either ­wholly or partially in favour of ­complainants.

“Our determinations are binding on insurers but not on complainants. Our service is free to consumers.

“We are an independent service, not answerable to the insurance industry,” she said.

She added that her office does not ­operate as a regulator. Bad practices are ­referred to the ­Financial Services Board (FSB), which regulates the funeral ­insurance industry.

Preiss said: “We resolve individual complaints and disputes against ­insurers. Where we become aware of a bad practice by an ­insurer or the industry, we recommend the necessary change to the insurer(s) and also report the practice to the ­regulator.”

Reuben Sedibane, a senior investigator at the Gauteng Office of Consumer Affairs, warned consumers against ­buying funeral policies with ­unregistered insurers and undertakers.

Sedibane said: “Consumers must ask for proof of ­registration. If the entity fails to provide such proof then they would be ­deregistered and could no longer continue to operate as this constitutes a criminal offence.”

Many consumers’ complaints are related to:

  • Unlicensed funeral undertakers ­selling funeral policies that are not ­underwritten by an insurance company;

  • Failure by the undertakers to honour payments to the beneficiaries;

  • Failure by the funeral undertakers to conduct the burial;

  • Late or non-payment of premiums by funeral undertakers to insurers, ­resulting in insurers cancelling funeral schemes;

  • Theft of the savings by some burial societies’ members; and

  • Administrative errors and poor ­communication between an insurer and the consumer which results in late ­payment of funeral benefits.

The FSB said it had, over the years, conducted investigations to weed out unscrupulous funeral undertakers.

The regulator said consumers are ­legally protected against unscrupulous entities who sell products they do not need and/or cannot afford.

Under the Financial Advisory and ­Intermediary Services Act, consumers have recourse against companies who provide poor ­financial advice including companies that sell funeral policies.

In terms of the act individuals and companies who give financial advice are obliged to register as financial service providers.

What to do before taking out a funeral policy?

  • Get the full contact details of the funeral ­undertaker and the insurance company that is underwriting the policy.

  • Check if the undertaker will pay out even if the funeral is not arranged through them. You have the right to a cash payment instead of a ­funeral service.

  • Always deal with entities that are registered as authorised financial services providers (FSP). Ask to see the FSP number.

  • Ensure that you have submitted the correct ­details of the people you wish to cover. The full names and ID numbers must be the same as the ones on the ID.

  • Read and understand the terms and conditions of the policy especially conditions such as ­waiting periods, exclusions, the time period for claiming benefits.

  • Keep policy documents in a safe place and tell family members, who may become claimants, where this is kept.

  • Ensure that the premium is deducted and paid to the insurer on time. Keep proof of payment. However, you still have a grace period of 15 or 30 days before it lapses.

  • You have 30 days from the date of receiving all documentation to cancel the policy. ­Cancellation should be in writing.

  • At least once a year, check that all the details of the insurance and cover is still the same.

  • Never sign a blank policy document or feel coerced by telemarketers to take out a ­funeral policy you cannot afford.

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