Many unsuspecting clients have paid fraudsters for non-existent policies, only to find out they have been scammed at the worst possible time. Scammers have been targeting vulnerable customers with the promise of quick, cheap funeral cover, mostly via face-to-face interaction. Premiums are picked up monthly, in cash, leaving the scammed policyholders to believe that they are covered. But what if your funeral policy is not what was advertised?
If the policy you have been paying for is not underwritten by a long-term authorised financial services provider, there is no guarantee on its service. That’s a problem because there is no one underwriting the risk. Even if money was being paid every month, the cash was never paid over to a registered insurance provider. The scammers take advantage of the fact that many people don’t know how the financial services industry works and, by the time the fraud is uncovered, it is often too late and the money that was paid over is gone.
Beneficiaries are left heartbroken when it’s time to claim because they are unable to get the promised pay-out. We encourage our readers to make sure that they take up funeral policies that are backed by reputable financial service providers.
What are “reputable financial service providers”?
A reputable, or more specifically, authorised Financial Services Provider (FSP) is a person or institution that has been registered with a license from the Financial Sector Conduct Authority of South Africa (FSCA) in terms of section 8 of the Financial Advisory and Intermediary Services Act, 2002. This Act regulates the rendering of financial advisory and intermediary services.
An Authorised FSP with a ‘long-term’ license is one that has a proven track record over time and will be able to honour the policy when it is needed, years from now. A funeral policy must be underwritten by a licensed long-term insurer to make sure that the policyholder and the beneficiaries named in the policy, receive their benefits when they need to claim.
Any policy that is not underwritten by a licensed insurer is not regulated in terms of the Insurance Act, putting consumers at risk should they claim.
Section 5 (1) of The Insurance Act (18 of 2017) Act prohibits any unlicensed person from conducting insurance business in South Africa. This means that no legitimate funeral policy can be sold unless there is a licensed insurer on-risk for that policy.
The impact on funeral cover policyholders
Being unable to claim when the time comes can have serious financial and legal consequences. Both in the short term and further down the line. The unexpected cost can be crippling enough but having few options to try and recover your losses can make things so much worse.
How do you check that you are dealing with an authorised FSP?
Luckily, it’s not too difficult. The first thing to look for is the FSP Number. If you want to see an example, our own FSP number for Legal&Tax is at the very bottom of every page of our website, including this one. If your funeral policy is with a different insurer, look at your policy documents. If you don’t have policy documents, that’s an immediate concern!
On your policy documents, you will be able to find the insurer’s FSP number. You can check that it’s a valid FSP number by clicking here.
If you can’t find your policy documents, you can request replacement copies from your insurer. If you ask through their website, you should be able to see their FSP number on their page.
If you must travel to their offices, their FSP number and a copy of their license must be prominently displayed on the premises.
The law also states that every policy document must include the name of the licensed insurer who is underwriting the policy. Consumers can check for the insurer’s details and contact the insurer to confirm that the policy in question is actually underwritten.
Authorised FSPs have proper channels like the FCSA and Long-Term Insurance Ombudsman who can address the concerns of policy holders directly.
Does this seem like a lot of work to do when you are already paying for a policy? Make sure that you know what you are paying for before you need to claim. You can call us for advice and make sure that you have lasting peace of mind
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