FSB REGULATORY EXAMINATION PREPARATION
Section 14:
Second Level Regulatory
Examination: Category IV
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Table of Contents
Heading
Page number
CHAPTER 1:
INTRODUCTION TO FUNERAL INSURANCE COVER
7
1.1
Introduction to funeral insurance cover
8
1.2
Generic product rules
14
1.3
Group funeral insurance
17
Summary
21
Self-Assessment Questions
21
Self-Assessment Answers
24
CHAPTER 2:
RECORD-KEEPING RELATING TO FUNERAL INSURANCE POLICIES
27
2.1
Premium payments on a funeral policy
28
2.2
The importance of the summary of the policy
31
Summary
33
Self-Assessment Questions
33
Self-Assessment Answers
36
CHAPTER 3:
THE PAYMENT OF FUNERAL CLAIMS
39
3.1
40
The payment of funeral claims
Summary
43
Self-Assessment Questions
43
Self-Assessment Answers
46
CHAPTER 4:
THE RELATIONSHIP BETWEEN THE ROLE-PLAYERS
49
4.1
The role-players in the funeral insurance environment
50
4.2
The role of the underwriter
52
4.3
Validity of the funeral insurance policy
54
4.4
Client awareness
55
Summary
56
Self-Assessment Questions
56
Self-Assessment Answers
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CHAPTER 5:
THE ROLE OF THE OMBUDSMAN
63
5.1
Introduction
64
5.2
The role of the Ombudsman for Long-term Insurance
64
5.3
The complaint process
65
Summary
67
Self-Assessment Questions
68
Self-Assessment Answers
71
References
75
Useful websites
75
Self-Assessment Test
77
Self-Assessment Questions
79
Self-Assessment Test Answers
87
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Tasks
The material provided in this guide is based on the following tasks, as
published in Board Notice 105 of 2008:
1
Explain why a customer (individual/group) would want to consider
funeral insurance cover.
2
Keep records as it relates to funeral insurance policies.
3
Deal with a claim as it relates to funeral insurance policies.
4
Describe the relationship between the role-players within the funeral
insurance policy environment. FSP, the underwriter and the client.
5
Describe the role of the life Ombudsman.
Please note that any reference to:

masculine gender implies also the feminine.

singular indicates also the plural, and vice-versa.
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5
Glossary of Terms
Assistance policy
An assistance policy is a life policy in which the
benefits that are provided do not exceed
R10
000, or another maximum amount prescribed by
the Minister
Assistance Business FSP
An
Assistance
Business
Financial
Services
Provider is a Financial Services Provider that
renders intermediary services relating to the
administration of assistance policies on behalf of
the Insurer.
FSP
Financial Services Provider
Waiting period
A waiting period is a period during which no
insured benefits will be payable if the life assured
dies due to natural causes.
Exclusion
Funeral cover will not be provided under certain
circumstances. These circumstances are thus
excluded from the policy
Non-disclosure of material
The omission of information that affects the
information
assessment of risk
Life Ombudsman
Ombudsman for Long-term Insurance
FAIS Ombud
Ombud for Financial Services Providers
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Chapter
1
Introduction to funeral insurance cover
This chapter covers the following criteria:
KNOWLEDGE CRITERIA:
Explain the product features and benefits of a specific product, included but not limited to:

the limits of cover.

who can be covered under the policy.
Explain the product rules, including but not limited to the applicable waiting periods.
Describe the exclusions and rules and regulations of the product.
Explain what is covered in the policy.
Explain when the policy will pay out.
Explain the definition of “exclusion”.
Name the exclusions in the event of certain predefined covers.
Understand the waiting periods and when they apply.
Understand the limits relating to who is covered and legislative ages.
Parameters of the product, family dependants that can be covered, children, spouse, under
the predefined policy parameters.
Understand the different types of groups and legal/contractual requirements/limitations.
Understand legal/contractual obligation regarding premiums and when cover falls away.
Explain to a group what they can do regarding the funeral cover and policies with their
members.
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Purpose
In this chapter we will be discussing funeral insurance cover and the reason why
a client (an individual or a group) will consider purchasing this cover.
We will
take a closer look at the type of cover provided under these products, who can be
insured for these benefits and some of the generic product details.
1.1
INTRODUCTION TO FUNERAL INSURANCE COVER
Funeral insurance is the most popular form of life insurance that is bought in
South Africa today. This is the most affordable way for the consumer to ensure
that they and their families will be given a decent funeral when the time comes.
In many cultures, a funeral is a very important event and family travel from far
and wide to attend a funeral of a loved one. Big funerals are also very costly.
The main purpose of funeral insurance is therefore to provide a lump sum that
can be used to pay for the cost of funerals.
Funeral insurance is sold in many different ways:

Directly to clients by the insurer

Through representatives on behalf of insurers

By banks

By retail stores, for example, Jet or Edgars

Under various group schemes, for example, an employer, a church, a
trade union, burial societies or other voluntary group schemes.
1.1.1
Types of funeral insurance
Insurers will offer these types of funeral insurance policies as whole life
products or as term products. This will vary from insurer to insurer and product
to product. It is therefore very important to read the rules of a specific product
in detail, as those rules will determine when the policy will pay out.
1.1.2
Who can be covered on funeral policies?
Depending on the type of product the client buys and the rules of the insurer,
the following persons could be covered on funeral policies:
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
Policies that provide cover for the client’s own funeral

Policies that provide cover for the funeral costs of the client’s own
funeral and that of his immediate family or

Policies that provide cover for the funeral costs for the client’s own
funeral, his immediate family and that of his extended family.
Example:
Jimmy is married to Jenny and they have two children, Nancy and Polly.
Jimmy would like to take out a funeral insurance policy for himself, his wife
and his two children.
He would also like to take out funeral cover for his
parents and his parents-in-law who are between the ages of 65 and 72.
Jimmy is able to take out funeral cover for each of the following members of
the family:

Spouse: Jenny

Children: Nancy and Polly

Jimmy’s parents

Jimmy’s parents-in-law
Certain age limits are imposed for the lives that are insured on funeral
insurance policies. The term of the policy will differ from product to product. It
is important that the client understand the term linked to the policy, as the life
insured for the funeral benefit is not necessarily covered for life, but only for a
specific term, for example, many funeral policies cease when the life insured
turns 65.
Important to note:

Some insurers provide cover before birth and will pay out in the event
of stillborn births.

In some cases where the child is a fulltime student, the maximum age
will be 25 or 26.

The insurer will normally impose a limitation on the number of extended
family members insured on the funeral policy.
Please note that there are no generic prescribed ages. These ages are all
determined by the specific product provider. Let’s look at some examples:
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Example:
Term (Should the client take out a funeral policy linked to a term, the example
below will reflect possible minimum and maximum entry ages as well as cease
ages.)
Assured lives
Minimum entry
Maximum
age
entry age
Cease age
Policyholder/life assured
15
64
65
Spouse
15
64
65
Children
From birth
<21
21 or if child
(Own, legally adopted,
is a fulltime
step children and
student, age
children born out of
will be 25
wedlock)
Extended family:***
From birth
64
65
Relative:

Parents and parentsin-law

Stepparents and
stepparents-in- -law

Grandparents and
grandparents-in-law

Brothers and sisters

Brothers and sistersin-law

Son/daughter-in-law

Nieces and nephews
Extended family:
Own children
From birth
<21
21 or if child
is a fulltime
student, age
will be 25
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Example:
Whole life (Should the client take out a funeral policy linked to whole life, the
example below reflects possible minimum and maximum entry ages.)
Assured lives
Minimum entry age
Maximum entry age
Policyholder/life assured
<65
65
Spouse
<65
65
Children
From birth
<21
(Own, legally adopted,
stepchildren and
children born out of
wedlock)
Extended family:***
<85
85
Relative:

Parents and
parents-in-law

Stepparents and
stepparents-in-law

Grandparents and
grandparents-in-law

Brothers and sisters

Brothers and sistersin-law

Son/daughter-in-law

Nieces and nephews
Extended family:
<21 or 25/26
65
Own children
If this is the prescribed age, below is an example of how it would be applied in
practice:
Example:
Mr Abel Zuma (40) is married to Maria (38).
Johannes (7) and Patience (4).
They have two children,
Abel and Maria live on a farm with their
parents, who are between the ages of 65 and 72. Abel’s grandmother, who
also lives with them, is 90 years old.
Abel decides to take out a comprehensive funeral policy with ABC Funeral
Insurers for his family. Abel is able to take out funeral cover for each of the
following members of the family:
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
Spouse: Maria

Children: Johannes and Patience

Abel’s parents

Abel’s parents-in-law
Abel cannot insure his grandmother on the policy because she is too old in
terms of the maximum entry age of 85 for the policy.
1.1.3
Cover limits on funeral policies
Funeral insurance is regulated by the Long-term Insurance Act and falls into the
category of Assistance Business. Funeral business is normally written under a
license that is restricted to assistance business, and the amount of cover on this
type of business is limited in the Act to R10 000 or as prescribed by the
minister. The amount that the minister has prescribed is R18 000.
Further, there are limits imposed on the lives of children in the Act.
These
limits are as follows:
Age
Limit
Younger than 6
R10 000
Younger than 14
R30 000
It is important to note that these limits imposed on the lives of children are
aggregated across ALL life and assistance policies on the life of such a child.
It is further important to remember that these limits are still subject to the
R18 000 limit imposed on funeral policies (i.e. cover on a funeral policy may
never exceed R18 000).
Example 1:
Mr Jacob Nkosi (35) has two children, Anna (5) and Petrus (8). He wants to
take out three funeral policies – on his own life and on the lives of his two
children. None of them have any other policies on their lives. The maximum
amount of cover allowed on the three policies will be as follows:
Mr Nkosi:
R18 000
Anna:
R10 000
Petrus:
R18 000
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Example 2:
Mr Enoch Shabalala (35) has two children Zodwa (5) and Errol (8).
Mr
Shabalala took out life policies on the lives of his children two years ago. The
life cover on the life policies is R6 000 per policy. He now wants to take out
funeral policies on the lives of his two children.
The maximum amount of
cover allowed on the two policies will be as follows:
Zodwa:
R 4 000
Errol:
R12 000
1.1.4
Features and benefits of funeral insurance policies
Generally funeral insurance policies will provide cover that will be used towards
the expenses of the funeral; however some insurers add additional features and
benefits onto the funeral policy to make the product a more robust and
attractive product to the client. Below are some examples of additional features
and benefits that can be found on some of the products. Please note that these
features and benefits differ from insurer to insurer and product to product.

Waiver of premium: For example, if the policyholder dies a waiver of
premium will waive the premium on the policy so that the policy will
continue for a predetermined period.

Accidental death benefit: This normally entails the payment of an
additional amount, sometimes up to double the insured amount if the
life assured died of an accident.

Disability benefits: This benefit is normally limited to the policyholder
and the benefit will be a limited disability benefit.

Terminal illness benefit:
A portion (usually half) of the life insured’s
benefit is paid out when he is diagnosed with a terminal illness and is
expected to die within 12 months.
The balance is paid out upon his
death.

Cashback benefits: With this benefit, some of the premiums paid over a
period are paid back to the client, for example five premiums paid back
after 60 premiums have been paid, provided that premiums are being
paid.

Premium holidays: Refer to Chapter 2 for more details.

Some insurers will offer services such as:
-
transportation of the deceased
-
trauma counselling
-
medical/health advice line
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1.1.5
-
HIV/AIDS information advice line
-
legal assistance services
-
emergency medical response
When will the funeral policy pay out?
The funeral insurance policy will pay on the death of the life assured on the
policy contract. Funeral claims are normally paid out within 48 hours, once the
insurer has received all the claims documentation. The claims process will be
dealt with in detail in Chapter 3.
1.2
GENERIC PRODUCT RULES
In this section we will take a look at some of the generic product rules that are
applicable to funeral insurance policies
1.2.1
Waiting periods
A waiting period is a period during which no insured benefits will be payable if
death of the life assured occurs due to natural causes. Waiting periods of 3 to
12 months are normally applied.
A waiting period is applied to each life assured from the start of the policy as
well as when a life assured is added onto the policy.
Depending on the insurer and the product rules applicable, if the life assured
dies within the waiting period of natural causes (or suicide), the premiums paid
towards the benefit will be refunded.
Example 1:
Joe has a funeral policy in which he insured himself, his wife and his two
children. He took out the policy four months ago.
Joe’s wife dies suddenly after a short illness.
Because the death of Joe’s wife occurred during the six-months waiting period,
no funeral benefit will be paid out; however the relevant premiums will be
refunded to Joe.
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Example 2:
Peter has a funeral policy in which he insured himself and his wife. He took out
the policy five months ago.
Peter dies in a taxi accident on the way home from work one day.
This policy will pay out the insured benefit, even though death occurred during
the six- months waiting period, because death was due to an accident and not
natural causes.
A waiting period will not apply in the following instance:
Example:
James has a funeral policy in which he insured his wife Magda and his two
children, Sarah and Julie.
Sarah recently had her 21st birthday. Because Sarah is now 21, she is no longer
eligible to be on James’ funeral policy as a child assured. James has instructed
the insurer to insure Sarah under the Extended Family Benefit on his policy.
No waiting period will therefore apply.
1.2.2
Exclusions
When an exclusion is applied and the life insured for the funeral benefit dies as
a result of the event excluded, the funeral benefit will not pay out.
Once again, some insurers will apply exclusions and some insurers waive the
exclusions.
Examples of exclusions that insurers may apply to funeral benefits:

Suicide
Most insurers apply a 24-month suicide exclusion. This means that if the life
insured commits suicide within 24 months of the start of the funeral benefit,
this benefit will not pay out.
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Example:
Harry took out a funeral policy for himself and his family eight months ago.
Harry commits suicide.
The funeral benefit on Harry’s life does not pay out because suicide is
excluded on the policy for a period of 24 months.

“Active participation in war, invasion, act of foreign enemy, civil war,
mutiny, insurrection, rebellion, revolution, military or usurped power or
active participation in unlawful labour disturbances, riot, strike or
lockout, or related to any taxi war”;
Example:
Petrus and some of his colleagues are involved in a labour dispute with
their
employer. They decide to strike and arrange a march in front of the office
building.
Because this is an illegal strike and march, the employer involves the services
of the police to disperse the crowd forming in front of the building. Things
suddenly get out of hand and Petrus is fatally wounded in a shooting incident.
Will Petrus’ funeral cover pay out?
The funeral cover might not pay out if Petrus’ policy excludes unlawful strikes
and riots.
Some insurers have waived this exclusion from their policies, particularly for the
SANDF and SAPS.

“Intentional contravention of any criminal law, whether legislative or at
common-law, by the insured client, or by anyone acting on behalf of the
insured or with the insured client’s permission or knowledge or by any
person claiming any benefit under the funeral policy.”
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Example:
Bob has a gambling problem and lost his month’s salary at the casino a few
nights ago. Bob had also borrowed money from loan sharks at the casino last
month that he has not yet paid back.
The loan sharks are demanding payment of the loan. No one wants to lend
Bob any more money and so he decides to rob the local Spaza shop late one
night.
Unfortunately Bob is killed when the owner of the shop shoots him
during the robbery.
Will Bob’s funeral cover pay out?
The funeral cover might not pay out if Bob’s policy excludes intentional
contravention of any criminal law.
It is important that the client reads the policy contract when he receives it, so
that he is aware of any exclusions that might apply to the policy.
1.3
GROUP FUNERAL INSURANCE
Funeral policies are not only purchased by individual clients but also purchased
by various groups.
1.3.1 Types of groups
Typical groups that would take out funeral insurance products are:

employers

trade unions

professional bodies

burial societies

other voluntary associations, for example, community stokvels
The most popular group would be the employers.
In this group, besides a
pension fund, the employer would also provide risk benefits (death and
disability), as well as a family funeral benefit.
One of the benefits for groups purchasing funeral policies on behalf of their staff
or members is that they can negotiate premiums, benefits and levels of cover of
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the funeral policies to meet the needs of their members. The insurer is able to
do this because they pool the risk of the lives assured in the group and this
lowers the premiums.
Normally the group (the employer or trade union for example) would be
approached or could even approach an insurer for a funeral product for its staff
or members. A funeral product will be negotiated in terms of:

eligible lives assured on the policy, for example, member, his spouse
and children, or whether the member will be allowed to insure extended
family on the policy as well.

levels of cover for the different lives insured on the policy.

the premiums payable, because the group will be purchasing the
product. Therefore a group premium will be paid as apposed to the
premium that the individual client will pay.
Insurers on the other hand have limitations in terms of the number of members
they are willing to insure on their products.
Example:
ABC Funeral Insurers provides three types of funeral policies that are
appropriate for employers to offer their staff, depending on the number of
staff members they have.
Product A is suitable for employers that have between 10 and 100 staff
members.
Product B is suitable for employers that have between 100 and 200 staff
members.
Product C is suitable for employers that have more than 200 staff members.
1.3.2 Contractual requirements
When the group decides to provide a funeral product/scheme for its
employees or members, the group will enter into a contract with the insurer.
Each party will have contractual requirements in terms of the agreement.
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Group
Insurer
Undertakes to pay the premium in
Undertakes to insure the members
terms of the contract.
of the group on the funeral
product/scheme in terms of the
The payroll/finance department of
contract.
the group will collect the relevant
premium from each employee’s
If premiums are not received,
salary.
funeral benefits may lapse or be
cancelled.
A premium payment is made to the
insurer. *
The group will provide a payment
schedule to the insurer. **
The group will provide the insurer
The
with all the relevant information, for
members
example,
application
product/scheme as per the service
nomination
level agreement in place.
forms,
completed
beneficiary
insurer
will
onto
register
the
the
funeral
forms, etc.
In the event of claims, the group
The insurer will process and pay out
will provide the completed, signed
claims as per the service level
claim
agreement in place.
forms
accompanying
as
well
as
any
documents to the
insurer.
*If the funeral product/scheme is provided through the risk benefits of an
approved pension fund, legislation (the Pension Funds Act) requires that the
payment is made by the 7th of the month.
charged on payments made after the
© INSETA– Section 14 10b
7th
Late payment interest will be
of the month.
19
**If the funeral product/scheme is provided through the risk benefit of an
approved pension fund, legislation (the Pension Funds Act) requires that the
payment schedule be received by the fund by the 15th of the month.
1.3.3 What groups can do for their members
Besides the contractual requirements that were discussed above, there are a
few things that the group can do regarding the funeral benefits/scheme that
they have implemented for their members. Let’s take a look at them:

As you will see in the next chapter, it is important for the premiums of
the funeral benefit/scheme to be paid in order for the member to be
covered for the benefits.
The group therefore, needs to ensure that
their payroll/finance department is geared to be able to collect
premiums from the employees’ or members’ salaries, and pay the
premiums to the insurer in the prescribed manner within the prescribed
time. So in other words, the group should have the necessary systems
and processes in place.

Another important aspect is “member education”.
It is important for
the group to ensure that the member knows exactly how the funeral
product/scheme works.
“Member education” can be done in several
ways:
-
Information sessions can be arranged. Most insurers will assist
with the presentation of information sessions for all the
members.
During these sessions the member can also ask
questions.

Information packs can be distributed to the members.
The group can appoint/nominate a person that can assist with any
queries and can act as the liaison between the group and the insurer.
This
person
can
also
assist
the
members
to
complete
any
documentation that might be required.

Newsletters can be sent to the members, highlighting any important
information.
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Summary
In this chapter we discussed features and benefits that are applicable to funeral
policies. In this discussion, we focused on who can be covered under a funeral
policy and the limits of cover. Here we paid particular attention to the limits as
prescribed by the definition of assistance business as well as looked at the limits
in terms of insuring the lives of children up to the age of 14 years.
Further, we discussed some of the most important product rules. These were,
for example:

when the funeral policy will pay out

what is covered in the policy

what waiting periods and exclusions are applicable to funeral policies.
Lastly we discussed the different groups that take out funeral benefits/schemes
for the staff or members, what the contractual obligations are of the group and
the insurer, as well as discussing some things that the group can put in place to
ensure that the administration of the product/scheme in terms of registration,
payment and claims submission, is done effectively. We also briefly discussed
some things that the group could implement in terms of educating their
members regarding the funeral benefit/scheme.
Self-Assessment Questions
1.
2.
Funeral insurance policies are available as:
a)
Whole life policies
b)
Term policies
c)
Whole life and Term policies
d)
Whole life and Term policy combination
Sarah is married to Jim and they have two children, Sue (3) and Dale
(7). Sarah would like to take out a funeral policy for the members of her
family. She can take out a funeral policy for:
a)
Herself only
b)
Herself and her spouse only
c)
Herself, her spouse and children over 5 years of age
d)
Herself, her spouse and both children
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3.
4.
5.
A child will be covered on a funeral policy until the age of:
a)
18 or until age 21 or 22 if the child is a full time student
b)
20 or until age 23 or 25 if the child is a full time student
c)
21 or until age 25 or 26 if the child is a full time student
d)
23 or until age 25 or 26 if the child is a full time student
Which of the following lives assured are regarded as extended family?
a)
Spouse and children
b)
Children and step children
c)
Spouse, parents and parents-in-law
d)
Parents and parent-in-law
Julie has two children, James (5) and Peter (8). She wants to take out
funeral cover of R50 000 on each of their lives. Can she do this?
a)
No, the amount of cover on the lives of children is limited to
R10 000 for James and R50 000 for Peter
b)
No, the amount of cover on the lives of children is limited to
R10 000 for both James and Peter
c)
No, the amount of cover on the lives of children is limited to
R30 000 for James and R10 000 for Peter
d)
No, the amount of cover on the lives of children is limited to
R10 000 for James and R30 000 for Peter
6.
One of the benefits that can be found on a funeral policy is a Terminal
Illness benefit. This benefit will pay out:
a)
A double benefit in the event that the life assured dies within 12
months of being diagnosed with a terminal illness
b)
A portion of the benefit in the event in the event that the life
assured dies within 12 months of being diagnosed with a
terminal illness
c)
A portion of the benefit when the life assured is diagnosed with
a terminal illness and is expected to die within 12 months, the
balance on death
d)
A portion of the benefit when the life assured is diagnosed with
a terminal illness and is expected to die within 12 months, a
double benefit on death
7.
22
A waiting period is a period in which no benefits will be payable,
a)
regardless of the cause of death
b)
unless cause of death is due to natural causes
c)
unless cause of death is due to an accident
d)
unless cause of death is suicide.
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8.
A waiting period will not be applied:
a)
When a child reaches 21 and is then covered under the
extended family benefit
b)
When a grandparent reaches 65 and is covered under the
extended family benefit
c)
When a nephew reaches 21 and is covered under the extended
family benefit
d)
When a brother reaches 65 and is covered under the extended
family benefit
9.
10.
An exclusion of _______ months will apply in the event of suicide.
a)
3
b)
6
c)
12
d)
24
When an employer decides to provide a funeral product/scheme for its
employees,
a)
The employer undertakes to pay the premiums and the insurer
undertakes to insure the lives of the members
b)
The employer undertakes to collect the premiums and pay it to
the insurer
c)
The insurer undertakes to insure the members of the group and
pay the proceeds to the group when a claim is submitted
d)
The insurer undertakes to insure the member of the group
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Self-Assessment Answers
1.
2.
Funeral insurance policies are available as
a)
Whole life policies
b)
Term policies
c)
Whole life and Term policies
d)
Whole life and Term policy combination
Sarah is married to Jim and they have two children, Sue (3) and
Dale (7). Sarah would like to take out a funeral policy for the
members of her family. She can take out a funeral policy for:
3.
4.
5.
a)
Herself only
b)
Herself and her spouse only
c)
Herself, her spouse and children over 5 years of age
d)
Herself, her spouse and both children
A child will be covered on a funeral policy until the age of:
a)
18 or until age 21 or 22 if the child is a full time student
b)
20 or until age 23 or 25 if the child is a full time student
c)
21 or until age 25 or 26 if the child is a full time student
d)
23 or until age 25 or 26 if the child is a full time student
Which of the following lives assured are regarded as extended
a)
Spouse and children
b)
Children and step children
c)
Spouse, parents and parents-in-law
d)
Parents and parent-in-law
Julie has two children, James (5) and Peter (8).
family?
She wants to take
out funeral cover of R50 000 on each of their lives. Can she do this?
a)
No, the amount of cover on the lives of children is limited to
R10 000 for James and R50 000 for Peter
b)
No, the amount of cover on the lives of children is limited to
R10 000 for both James and Peter
c)
No, the amount of cover on the lives of children is limited to
R30 000 for James and R10 000 for Peter
d)
No, the amount of cover on the lives of children is limited to
R10 000 for James and R30 000 for Peter
24
© INSETA– Section 14 10b
6.
One of the benefits that can be found on a funeral policy is a
Terminal Illness benefit. This benefit will pay out:
a)
A double benefit in the event that the life assured dies within 12
months of being diagnosed with a terminal illness
b)
A portion of the benefit in the event in the event that the life
assured dies within 12 months of being diagnosed with a
terminal illness
c)
A portion of the benefit when the life assured is diagnosed with
a terminal illness and is expected to die within 12 months, the
balance on death
d)
A portion of the benefit when the life assured is diagnosed with
a terminal illness and is expected to die within 12 months, a
double benefit on death
7.
8.
A waiting period is a period in which no benefits will be payable,
a)
regardless of the cause of death
b)
unless cause of death is due to natural causes
c)
unless cause of death is due to an accident
d)
unless cause of death is suicide.
A waiting period will not be applied:
a)
When a child reaches 21 and is then covered under the
extended family benefit
b)
When a grandparent reaches 65 and is covered under the
extended family benefit
c)
When a nephew reaches 21 and is covered under the extended
family benefit
d)
When a brother reaches 65 and is covered under the extended
family benefit
9.
An exclusion of _______ months will apply in the event of suicide.
a)
3
b)
6
c)
12
d)
24
© INSETA– Section 14 10b
25
10.
When an employer decides to provide a funeral product/scheme for
its employees,
a)
The employer undertakes to pay the premiums and the insurer
undertakes to insure the lives of the members
b)
The employer undertakes to collect the premiums and pay it to
the insurer
c)
The insurer undertakes to insure the members of the group and
pay the proceeds to the group when a claim is submitted
d)
26
The insurer undertakes to insure the member of the group
© INSETA– Section 14 10b
Chapter
2
Record-keeping relating to funeral insurance
policies
This chapter covers the following criteria:
KNOWLEDGE CRITERIA:
Explain what happens if the monthly premium is not paid by the client.
Describe why a summary of the policy document should be provided to the client.
© INSETA– Section 14 10b
27
Purpose
In this chapter we will be discussing the consequences of the non-payment of
premiums on a funeral policy, as well as why it is important that a client receives
a summary of the policy document.
2.1
PREMIUM PAYMENTS ON A FUNERAL POLICY
2.1.1
Non-payment of premiums
When a client and an insurer reach an agreement in which the insurer agrees, in
exchange for a premium, to provide certain funeral benefits to the client and
the members of his family as stipulated in the contract, it is expected that both
parties will fulfil their obligations to the contract.
The client’s obligation is to
pay the premiums and the insurer’s obligation is to provide the benefits.
Therefore it is safe to say that if the client does not pay the premiums due on
the policy within the stipulated timeframe, the policy will cease and no benefits
will be payable on this policy.
Terms and conditions of funeral policies differ from insurer to insurer, but in
general it is expected that the premium will be paid from the start date of the
policy and cover on the various benefits will commence on that date. In terms
of the premium payments, there will be a period in which the premium payment
must be made, in order to maintain the benefits on the policy.
This grace
period is usually between 15 and 31 days.
It is the policyholder’s responsibility to ensure that the premiums are paid on
the policy. It is important that the client keeps proof of his premium payments.
Example:
Shirley Parks took out a funeral policy with ABC Funeral Insurers. The start
date of the policy is 1 April 2010. The debit order on the policy was scheduled
for 1 April 2010. Shirley, however, did not leave enough money in her bank
account for the funeral policy’s premium.
In terms of the funeral policy contract, the premium of the policy must be paid
within 31 days.
28
© INSETA– Section 14 10b
Shirley therefore needs to ensure that the premium that was due on 1 April
2010 is paid by 2 May 2010 or else her policy will be in danger of lapsing or
being cancelled.
Many insurers add features to the funeral products that they sell that allow the
client to miss premiums and still enjoy the benefits under the policy, even
though in some cases the benefits are limited. Let’s look at a few examples of
features commonly added to funeral products being sold.
Please note: These features cost money so the addition of the types of features
discussed below will differ from insurer to insurer as well as from product to
product. The terminology used may also differ.

Premium holiday
The client can exercise a “premium holiday” option. This means that if a client
has paid six premiums on his policy, he can miss up to six premiums and the
policy will not be cancelled. The policy will still provide cover during this time.
If seven premiums are missed however, the policy will be cancelled.
Example:
Edith Johnson took out a funeral policy with ABC Funeral Insurers six months
ago. Due to financial difficulty, Edith is unable to pay the premiums of the
policy for the next few months.
Edith contacts ABC Funeral Insurers and they agree to grant her a premium
holiday of up to six months. This means that Edith will still enjoy the benefit
of having funeral cover, but does not have to pay the premiums of the policy
for the period.
After six months Edith must start paying the premiums on the policy again.
Edith does not have to pay back the premiums “missed” during this “premium
holiday”.
Let’s assume that Edith does not start paying her premiums, and misses the
seventh premium. Edith's policy will therefore be cancelled.
© INSETA– Section 14 10b
29

Unemployment and pregnancy payment holiday
With this option, the client will receive a break from paying premiums due to
unemployment, as well as in the event of pregnancy, for a period of up to 12
months. During this time, the policy will provide full cover should the client die
due to an accident, but cover could however be limited during this “payment
holiday” period if the client dies of natural causes.
Example:
Sue took out a funeral policy with R5 000 funeral cover with ABC Funeral
Insurers. Sue is five months pregnant with her first child and due to the
payment of extra medical costs that she has; she is unable to pay the
premiums of her policy.
Sue approaches ABC Funeral Insurers and they agree to grant her a premium
holiday of up to 12 months. During this time however, if she should die in an
accident, the policy will pay out the full R5 000 funeral cover. However, if Sue
should die of an illness, the cover on this funeral benefit will be limited.

Retrenchment payment holiday
This is a popular option that is added to some funeral products.
With this
option, the client will not have to pay any premiums for a period of up to six
months if he is retrenched. In some cases, though, the funeral cover could be
limited.
Example:
Bill Murray took out a funeral policy with ABC Funeral Insurers eight months
ago. He received notification two weeks ago that he is going to be retrenched
from his job at the end of the month.
Bill approaches ABC Funeral Insurers for assistance because he will be unable
to pay the premiums of his funeral policy for the next few months until he has
found another job.
Because Bill has the retrenchment premium holiday benefit on his policy, ABC
Funeral Insurers agree that Bill does not have to pay the premiums on the
policy for a period of six months.
30
© INSETA– Section 14 10b

Waiver of premium benefit
On some funeral policies, a waiver of premium benefit can be added to the
policy, in some cases at an extra cost. This benefit will waive future premium
payments in the event of the client’s death and/or disability.
Example:
Bennie took out a funeral policy with ABC Funeral Insurers. He has insured
his wife Sannie and their two children, Pietie and Sara on the policy too.
Bennie has chosen to add the waiver of premium benefit on the policy in the
event of his death or disability.
Eight months later, Bennie dies in an accident at work.
The funeral policy
pays out the funeral cover on Bennie’s life. The policy then continues on the
life of Sannie, and the premiums of the policy are waived for the remainder of
the term of the policy, because of the waiver of premium benefit that Bennie
had added to the policy.
It is very important for the client to contact the insurer if he needs to arrange a
premium holiday or if he cannot continue paying the premiums, so that
appropriate action can be taken.
If he does not inform the insurer and no
arrangements have been made, the client’s policy can lapse or be cancelled and
the client will lose all his benefits.
2.2
THE IMPORTANCE OF THE SUMMARY OF THE POLICY
In the business of selling funeral policies, there are many “scams” and illegal
providers around that sell funeral policies to clients. It is therefore important
that the client deals with an accredited financial services provider. The financial
services provider must have a license from the Financial Services Board (FSB).
When the client takes out a funeral policy, he must receive a policy summary
when the insurer accepts his application.
Section 48 of the Long-term
Insurance Act prescribes that the insurer must send the client a policy summary
within 60 days of accepting the risk on this policy. In terms of the LOA Code on
Assistance Business (as taken over by ASISA) the period is 30 days. This Code
can be found on the ASISA website at www.asisa.co.za. The client must insist
© INSETA– Section 14 10b
31
on receiving such a document, he must then read it and make sure he
understands the detail contained in the document.
2.2.1
Contents of the policy summary
As mentioned above, the client must ensure that he receives a policy summary
from the insurer that he bought the funeral policy from. This policy summary
should contain the following:

Information regarding the policyholder and the lives insured for funeral
benefits under the policy. Incorrect details could affect the validity of
the policy contract.

Details of the benefits provided under the policy, for example, how
much funeral cover each person under the policy has.

Details of any exclusion as discussed in Chapter 1.

Details of the premium that the client has to pay on the policy.
The
policy summary should also indicate if this premium will increase every
year or not, and what this increase will be if applicable.
The policy
summary should also explain what would happen to the policy if the
client does not pay the premiums.

Details of any guarantees provided by the policy.
In addition to the summary, the insurer will often provide information on the
following:

How is the policy going to pay out in the event of a claim, for example,
will the policy pay for a funeral, or will the policy pay out a lump sum of
money to a beneficiary who will use the money towards a funeral?

Details of the beneficiaries, in other words, who is going to receive the
funeral benefits?

Details regarding the cooling-off period - this is the timeframe the client
has to cancel the policy if he is not entirely happy with the product.

Details of terms and conditions relating to the policy.

Details of the implications if the client replaces one policy with another.

Any other assumptions as necessary.
As mentioned earlier, it is important that the client understands the details of
the policy contract so that he knows his rights and obligations on the contract
and so that when the client or any of the insured family members die, there are
not problems experienced with the payment of the benefits to the beneficiaries.
32
© INSETA– Section 14 10b
Summary
In this chapter we discussed what would happen if the client does not pay the
premiums of the funeral policy. In this section we also discussed various
features that insurers include on the funeral products that they sell that assist
the client when he is unable to pay his premiums for a time.
Further in this chapter we discussed the fact that the client must receive a
policy summary or policy contract and that there is certain information that
must be in the policy summary, for example: details of the policy in terms of
benefits provided and the values, premiums, exclusions, loadings, policy
expenses and guarantees.
Self-Assessment Questions
1.
Peter has a funeral policy and the premium of this policy is payable by
debit order on the first of every month.
Should the premium of the
policy not be paid, there is a period in which Peter is required to pay the
premium. This period is known as:
2.
a)
premium paying period
b)
premium extension period
c)
days of grace
d)
grace period
If the client does not pay the premiums of his policy within the
stipulated time, the policy will:
3.
a)
lapse or be cancelled
b)
continue for a further six months and then lapse
c)
provide cover that will pay out if the client dies in an accident
d)
provide cover that will pay out, no matter how the client dies
The grace period within which the premiums must be paid between:
a)
15 and 21 days
b)
15 and 25 days
c)
15 and 29 days
d)
15 and 31 days
© INSETA– Section 14 10b
33
4.
Molly is planning to take out a funeral policy with ABC Funeral Insurers.
She wants to insure herself, her husband and her two children for
funeral cover on this policy.
Molly also wants to ensure that if she
should become disabled, she will not have to continue paying the
premiums but the policy will not lapse or be cancelled. Molly can add a
benefit onto the policy known as:
5.
a)
disability premium benefit
b)
death and disability cover benefit
c)
waiver of premium benefit
d)
waiver of death and disability benefit
Kenny took out a funeral policy four months ago. He has found that he
cannot afford the premiums on the policy.
Kenny read in his policy
contract that he could apply for a premium holiday.
He contacts the
insurer and they tell him:
a)
he is eligible to take a premium holiday because he has paid
two premiums already
b)
he is eligible to take a premium holiday because he has paid
four premiums already
c)
he is not eligible to take a premium holiday because he has not
paid six premiums yet
d)
He is not eligible to take a premium holiday because he has not
paid seven premiums yet
6.
When the client takes out a funeral policy, he must receive a:
a)
brochure summarising the features of the funeral policy
b)
letter with the details of the insurer and the funeral policy
number
7.
c)
policy summary relating all the details of the policy
d)
letter summarising the terms and conditions of the policy
It is very important that the client understands the details of the funeral
policy that he has taken out. The client will find all the details pertaining
to the policy in the:
34
a)
product brochure
b)
Client Advice Record
c)
policy summary
d)
policy quotation
© INSETA– Section 14 10b
8.
9.
The policy summary should include:
a)
the Long-term Insurance Ombudsman
b)
the FAIS Ombudsman’s contact details
c)
terms and conditions relating to the premium holidays
d)
terms and conditions relating to the policy contract.
Thomas recently took out a funeral policy with ABC Funeral Insurers.
The representative who sold Thomas the policy told him that he would
receive a policy summary within a few days after the policy was issued.
He further told him to read the policy summary thoroughly to ensure
that he understands the contents of the document.
Why would the
representative tell Thomas this?
a)
To ensure that Thomas understands the terms and conditions of
the policy contract
b)
To ensure that Thomas knows when the premium is due to be
paid and how the premium will be paid
c)
To ensure that Thomas knows where to find the details of the
Long-term Insurance Ombudsman
d)
To ensure that Thomas knows where to find the details on the
FAIS Ombudsman
10.
Maggie recently took out a funeral policy with ABC Funeral Insurers.
The representative who sold Maggie the policy delivered the policy
contract
to
Maggie
shortly
after
the
policy
was
issued.
The
representative discussed the details of the policy contract with Maggie.
Why did the representative do this?
a)
To ensure that Maggie knows when the premiums of the policy
are due and how they will be paid
b)
To ensure that Maggie knows her rights and obligations with
respect to the policy contract
c)
To ensure that Maggie knows whom to contact when she wants
to claim for funeral benefits on the policy
d)
To ensure that Maggie knows when the policy will cease
© INSETA– Section 14 10b
35
Self-Assessment Answers
1.
Peter has a funeral policy and the premium of this policy is payable by
debit order on the first of every month.
Should the premium of the
policy not be paid, there is a period in which Peter is required to pay the
premium. This period is known as:
2.
a)
premium paying period
b)
premium extension period
c)
days of grace
d)
grace period
If the client does not pay the premiums of his policy within the
stipulated time, the policy will:
3.
4.
a)
lapse or be cancelled
b)
continue for a further six months and then lapse
c)
provide cover that will pay out if the client dies in an accident
d)
provide cover that will pay out, no matter how the client dies
The grace period within which the premiums must be paid between:
a)
15 and 21 days
b)
15 and 25 days
c)
15 and 29 days
d)
15 and 31 days
Molly is planning to take out a funeral policy with ABC Funeral Insurers.
She wants to insure herself, her husband and her two children for
funeral cover on this policy.
Molly also wants to ensure that if she
should become disabled, she will not have to continue paying the
premiums but the policy will not lapse or be cancelled. Molly can add a
benefit onto the policy known as:
36
a)
disability premium benefit
b)
death and disability cover benefit
c)
waiver of premium benefit
d)
waiver of death and disability benefit
© INSETA– Section 14 10b
5.
Kenny took out a funeral policy four months ago. He has found that he
cannot afford the premiums on the policy.
Kenny read in his policy
contract that he could apply for a premium holiday.
He contacts the
insurer and they tell him:
a)
he is eligible to take a premium holiday because he has paid
two premiums already
b)
he is eligible to take a premium holiday because he has paid
four premiums already
c)
he is not eligible to take a premium holiday because he has not
paid six premiums yet
d)
He is not eligible to take a premium holiday because he has not
paid seven premiums yet
6.
When the client takes out a funeral policy, he must receive a:
a)
brochure summarising the features of the funeral policy
b)
letter with the details of the insurer and the funeral policy
number
7.
c)
policy summary relating all the details of the policy
d)
letter summarising the terms and conditions of the policy
It is very important that the client understands the details of the funeral
policy that he has taken out. The client will find all the details pertaining
to the policy in the:
8.
a)
product brochure
b)
Client Advice Record
c)
policy summary
d)
policy quotation
The policy summary should include:
a)
the Long-term Insurance Ombudsman
b)
the FAIS Ombudsman’s contact details
c)
terms and conditions relating to the premium holidays
d)
terms and conditions relating to the policy contract.
© INSETA– Section 14 10b
37
9.
Thomas recently took out a funeral policy with ABC Funeral Insurers.
The representative who sold Thomas the policy told him that he would
receive a policy summary within a few days after the policy was issued.
He further told him to read the policy summary thoroughly to ensure
that he understands the contents of the document.
Why would the
representative tell Thomas this?
a)
To ensure that Thomas understands the terms and conditions of
the policy contract
b)
To ensure that Thomas knows when the premium is due to be
paid and how the premium will be paid
c)
To ensure that Thomas knows where to find the details of the
Long-term Insurance Ombudsman
d)
To ensure that Thomas knows where to find the details on the
FAIS Ombudsman
10.
Maggie recently took out a funeral policy with ABC Funeral Insurers.
The representative who sold Maggie the policy delivered the policy
contract
to
Maggie
shortly
after
the
policy
was
issued.
The
representative discussed the details of the policy contract with Maggie.
Why did the representative do this?
a)
To ensure that Maggie knows when the premiums of the policy
are due and how they will be paid
b)
To ensure that Maggie knows her rights and obligations with
respect to the policy contract
c)
To ensure that Maggie knows whom to contact when she wants
to claim for funeral benefits on the policy
d)
38
To ensure that Maggie knows when the policy will cease
© INSETA– Section 14 10b
Chapter
3
The payment of funeral claims
This chapter covers the following criteria:
KNOWLEDGE CRITERIA:
Explain the importance of accurate client contact details to be included on the funeral
insurance records.
Explain the claims procedures.
Explain what records must be kept related to the claims procedure.
Explain whom to contact after the death of the insured person.
Explain what the timeframe is for contacting the required role-players after the death of the
insured person.
© INSETA– Section 14 10b
39
Purpose
In this chapter we are going to look at the importance of accurate client details
on the funeral policy records. We will also briefly look at the claims process and
we will look at what is required in terms of FAIS with regards to keeping records
of the claim.
3.1
THE PAYMENT OF FUNERAL CLAIMS
3.1.1
The importance of accurate client details
It is the policyholder’s responsibility and in his best interest to ensure that his
personal details are kept up-to-date on the insurer’s database. These details
will include his current address and contact details.
Some specific instances where it is very important that the insurer’s database is
up-to-date with the client’s latest details are the following:

Funeral insurance is mostly written as term insurance and comes to an
end after an agreed term.
Notification will be sent to the client
informing him of the status of his policy and when benefits will cease.

Should the client miss any premiums, he will also be informed thereof
by the insurer, thus once again making it important that updated details
are kept on record.
3.1.2
The claims process

Who should be contacted?
The insurer should be informed of the death of the life assured as soon as
possible. Some insurers have a certain period in which they will consider and
pay out claims relating to the death of a life assured on the policy. In some
cases, it is up to 12 months after the death of the life assured. In most cases
however, this claim will be lodged in time to pay for the funeral.
The policyholder or the beneficiary will need to either contact the insurer via the
relevant call centre number, or visit the nearest client-servicing centre.
40
© INSETA– Section 14 10b

What documentation is required to submit a claim?
The requirements might differ from insurer to insurer.
The following are
standard documents that will be required:
-
Completion of any relevant claim forms
-
Originally certified copy of the deceased’s ID
-
Originally certified copy of the death certificate
-
For accidental deaths, a police declaration
-
The beneficiary/policyholder’s ID
-
Proof of beneficiary/policyholder’s banking details

When will the claim pay out?
One of the main features of funeral insurance is that claims are paid out within
48 hours, provided that all the required documentation is received by the
insurer.
3.1.3
Record-keeping
In terms of Section 18 of the FAIS Act, the insurer has to keep records relating
to the payment of claims under the funeral policy for a minimum period of five
years after the last claim was paid or the policy ceased.
The documentation
that will be kept on record will be the following:

The completed and signed claim form

Originally certified copy of the deceased’s ID

Originally certified copy of the death certificate

In the event of accidental deaths, a police declaration

The beneficiary/policyholder’s ID

Proof of beneficiary/policyholder’s banking details

As well as any relevant documentation relating to the process of the
claim payment.
These records must be kept in a format that makes it easy to access, for
example, in an electronic format, which can be easily printed if required. These
records must be stored in an appropriate facility, which cannot be destroyed,
but accessible in such a way the information must be available within seven
days should the Registrar request the information.
© INSETA– Section 14 10b
41
3.1.4
Claims process summary
Policyholder or beneficiary informs insurer of the
death of the life assured
Insurer requires submission of the relevant claims
documentation by the policyholder or beneficiary
Insurer will process the
claim
Claim accepted and
payment authorised
within 48 hours after
receipt of all claim
documentation
Claim rejected and
notification and
reason for rejection
sent to policyholder
or beneficiary
Records kept as per FAIS Act
42
© INSETA– Section 14 10b
Summary
In this chapter we discussed the importance of the policyholder keeping his
address and contact details up-to-date on the insurer’s database.
We also discussed the funeral claims process in terms of whom to contact and
what documentation needs to be submitted in order for a death claim to be paid
out.
Finally we also discussed the requirements with regards to keeping records in
terms of FAIS.
Self-Assessment Questions
1.
Peggy recently took out a funeral policy for herself and her family.
She was advised to make sure that she informs the insurer if any of
her details change. Why was she advised to this?
a)
Her claims will not pay out if her details are not up to date
b)
Her claims will take longer to pay out because her details must
first be verified
c)
So that she will receive important notifications regarding the
status of her policy
d)
So that the insurers marketing department can send her
pamphlets of any special offers
2.
Jen took out a funeral policy a few years ago in which she insured
her family. Jen’s husband died recently and Jen must submit a claim
for the payment of her husband’s funeral benefit. Jen should contact
a)
The branch admin assistant
b)
The admin manager of the relevant branch
c)
The branch manager of the relevant branch
d)
The client servicing centre
© INSETA– Section 14 10b
43
3.
Kevin took out a funeral policy a few years ago in which he insured
his family. Kevin’s wife died recently and Kevin must submit a claim
for the payment of his wife’s funeral benefit. Kevin can contact
4.
a)
The branch admin assistant
b)
The admin manager of the relevant branch
c)
The branch manager of the relevant branch
d)
The insurer’s call centre
Before the client/beneficiary can submit a claim to the insurer for
the payment of the funeral benefits, the client/beneficiary should be
in procession of
5.
a)
The deceased’s death certificate and ID
b)
The deceased’s bank details and receipt from last premium paid
c)
The deceased’s last salary advice
d)
The deceased’s copy of the beneficiary notification
Angela has just submitted a funeral claim for the payment of the
funeral benefits on her husband’s life.
claim
will
be
paid
out
within
She was advised that the
___________
provided
all
the
requirements have been received by the insurer.
6.
a)
12 hours
b)
24 hours
c)
36 hours
d)
48 hours
Mary is the policyholder of a funeral policy and has insured her family
as well has her parents and her parents-in-law. She has submitted a
funeral claim for the payment of her father-in-laws funeral benefit.
In order for the insurer to pay out the proceeds toher as the
policyholder, they require Mary’s:
a)
Latest postal address so that they can send her a cheque
b)
Latest physical address so that they can courier a cheque to her
c)
Mary’s banking details so that the proceeds can be paid directly
to her
d)
Mary’s mother-in-law’s banking details so that the proceeds can
be paid directly to her
44
© INSETA– Section 14 10b
7.
The FAIS Act prescribes that the insurer must keep records relating
to the payment of the claims under a funeral policy for a period of:
8.
a)
1 year
b)
2 years
c)
3 years
d)
5 years
In terms of Section 48 of the Long-term Insurance Act, records are
to be kept:
9.
a)
In a steel cabinet that is fireproof and is easily accessible
b)
In the basement of the office building and is easily accessible
c)
In an electronic format that is easily accessible
d)
In a safe at the insurers bank that is easily accessible
In
terms
of
Section
48
of
the
Long-term
Insurance
Act,
the
following records relating to the claim should be kept:
a)
All documentation submitted by the policyholder/beneficiary
b)
All documentation relating to the payment of the claim by the
insurer
c)
All documentation submitted by the policyholder/beneficiary
and all documentation relating to the payment of the claim
by the insurer
d)
All documentation relating to the sale of the policy and the
premium notifications sent to the policyholder
10.
In terms of Section 48 of the Long-term Insurance Act, all records
must be kept in a format that is easily accessible and must be
available within ____ should the Registrar request the information
a)
2 days
b)
3 days
c)
5 days
d)
7 days
© INSETA– Section 14 10b
45
Self-Assessment Answers
1.
Peggy recently took out a funeral policy for herself and her family.
She was advised to make sure that she informs the insurer if any of
her details change. Why was she advised to this?
a)
Her claims will not pay out if her details are not up to date
b)
Her claims will take longer to pay out because her details must
first be verified
c)
So that she will receive important notifications regarding the
status of her policy
d)
So that the insurers marketing department can send her
pamphlets of any special offers
2.
Jen took out a funeral policy a few years ago in which she insured
her family. Jen’s husband died recently and Jen must submit a claim
for the payment of her husband’s funeral benefit. Jen should
3.
a)
The branch admin assistant
b)
The admin manager of the relevant branch
c)
The branch manager of the relevant branch
d)
The client servicing centre
contact
Kevin took out a funeral policy a few years ago in which he insured
his family. Kevin’s wife died recently and Kevin must submit a claim
for the payment of his wife’s funeral benefit. Kevin can contact
4.
a)
The branch admin assistant
b)
The admin manager of the relevant branch
c)
The branch manager of the relevant branch
d)
The insurer’s call centre
Before the client/beneficiary can submit a claim to the insurer for
the payment of the funeral benefits, the client/beneficiary should be
in procession of
46
a)
The deceased’s death certificate and ID
b)
The deceased’s bank details and receipt from last premium paid
c)
The deceased’s last salary advice
d)
The deceased’s copy of the beneficiary notification
© INSETA– Section 14 10b
5.
Angela has just submitted a funeral claim for the payment of the
funeral benefits on her husband’s life.
claim
will
be
paid
out
within
She was advised that the
___________
provided
all
the
requirements have been received by the insurer.
6.
a)
12 hours
b)
24 hours
c)
36 hours
d)
48 hours
Mary is the policyholder of a funeral policy and has insured her family
as
well
has
her
parents
and
her
parents-in-law.
She
has
submitted a funeral claim for the payment of her father-in-laws funeral
benefit. In order for the insurer to pay out the proceeds to her as
the policyholder, they require Mary’s:
a)
Latest postal address so that they can send her a cheque
b)
Latest physical address so that they can courier a cheque to her
c)
Mary’s banking details so that the proceeds can be paid directly
to her
d)
Mary’s mother-in-law’s banking details so that the proceeds can
be paid directly to her
7.
The FAIS Act prescribes that the insurer must keep records relating
to the payment of the claims under a funeral policy for a period of:
8.
a)
1 year
b)
2 years
c)
3 years
d)
5 years
In terms of Section 48 of the Long-term Insurance Act, records are
to be kept:
a)
In a steel cabinet that is fireproof and is easily accessible
b)
In the basement of the office building and is easily accessible
c)
In an electronic format that is easily accessible
d)
In a safe at the insurers bank that is easily accessible
© INSETA– Section 14 10b
47
9.
In
terms
of
Section
48
of
the
Long-term
Insurance
Act,
the
following records relating to the claim should be kept:
a)
All documentation submitted by the policyholder/beneficiary
b)
All documentation relating to the payment of the claim by
the insurer
c)
All documentation submitted by the policyholder/beneficiary
and all documentation relating to the payment of the claim
by the insurer
d)
All documentation relating to the sale of the policy and the
premium notifications sent to the policyholder
10.
In terms of Section 48 of the Long-term Insurance Act, all records
must be kept in a format that is easily accessible and must be
available within ____ should the Registrar request the information
48
a)
2 days
b)
3 days
c)
5 days
d)
7 days
© INSETA– Section 14 10b
Chapter
4
The relationship between the role-players
This chapter covers the following criteria:
KNOWLEDGE CRITERIA:
Identify the role-players involved within the funeral insurance environment.
Explain the role of the underwriter, included but not limited to:

their function (responsibility)

what they do regarding risk to the business and the client.
Explain when a policy will be legitimate (valid).
Explain
what
the
customer
should
be
aware
of
and
stay
away
from
(unregistered/unlicensed operators).
© INSETA– Section 14 10b
49
Purpose
In this chapter we are going to identify the different role-players involved within
the funeral insurance environment. We will discuss the role of the underwriter in
particular and the function that they fulfil. We will also discuss when the funeral
policy will be regarded as legitimate and focus on aspects that clients should be
aware of in the marketplace with regards to unregistered and unlicensed
operators in the industry.
4.1
THE
ROLE-PLAYERS
IN
THE
FUNERAL
INSURANCE
ENVIRONMENT
4.1.1
Description of the different role-players
There are several role-players in the funeral insurance environment:
Role-player
Insurer
Description
The insurer agrees, in exchange for a premium, to
provide the client with funeral cover for him and his
family.
The insurer will assume the risk of the funeral cover by
pooling together the risk.
The insurer will pay out the funeral cover as agreed on
the death of the lives assured on the funeral policy.
The provider must be licensed to sell funeral insurance.
Scheme
The scheme administrator manages the scheme on
administrator (in the
behalf of the insurer in the case of schemes.
case of a group
scheme)
Underwriter
The underwriter will underwrite the application for
funeral cover and accept the risk.
The underwriter will determine the risk the life assured
poses for the insurer.
Representative
The representative is the person who will advise the
policyholder regarding the most appropriate solution to
meet his needs in respect of the funeral insurance.
50
© INSETA– Section 14 10b
Role-player
Policyholder
Description
This person is the owner of the policy and is entitled to
the rights and benefits of the policy.
This person is
responsible for ensuring that the premiums are paid on
the policy.
Life assured
The person who is insured for the funeral benefits and
on whose death, the benefit/policy will pay out.
Premium payer
The person who will pay the premiums of the policy.
This is normally the policyholder, but can be another
party.
Beneficiary
This
is
the
person
who
was
nominated
by
the
policyholder to receive the benefits under the policy.
The nomination could be for proceeds or for ownership.
4.1.2
The relationship between the different role-players
Insurer
Underwriter
Receives the
Scheme Administrator
Determines the risk
premiums and
Administers the scheme
accepts risk.
Representative
Advises the client
Life assured:
Self
Policyholder
Premium payer
Owns the
Pays the
policy
premium
Life assureds
Spouse and
children
Life assureds
Extended family
© INSETA– Section 14 10b
Beneficiary
Receives benefits
51
4.2
THE ROLE OF THE UNDERWRITER
As mentioned in Chapter 1, funeral insurance falls into the category of
Assistance business and as such the amount of cover provided on this business
is limited. The amount is currently prescribed at R18 000.
Due to the fact that the level of cover on funeral policies is low cover, when
acquiring a funeral policy, there is no medical underwriting.
The client might
however be asked to answer a few questions about the state of his health, but
he will not have to go for any health check-ups or medical testing.
The reason why the client will be asked to answer a few questions about the
state of his health is to enable the underwriters to determine the risk that this
client poses for the insurer. Remember, the insurer undertakes to pay out the
funeral cover in the event of the client’s death. The insurer needs to make sure
that it can meet its obligations in terms of paying out the funeral claims;
therefore, the role of the underwriter is to ensure that the insurer is not
exposed to risks that will result in the insurer’s inability to pay out the funeral
claims.
Because the underwriters do not call for any health check-ups or medical tests,
they have to rely on the disclosure of material information by the client
regarding his health status to determine the risk he is to the insurer. The client
therefore is required to answer the questions honestly. Should the client not
disclose any material information that is used to assess the risk, and the insurer
finds about the non-disclosure of the information, the insurer can refuse to pay
out the claim.
Example:
Annie and Jessie are best friends.
Annie is 38 years old, lives a healthy lifestyle by eating correctly and
exercising regularly. She does not drink or smoke.
Jessie is also 38 years old. She however lives on junk food, is overweight,
smokes and does not exercise at all.
52
© INSETA– Section 14 10b
Based on the lifestyle of these two friends, who will pose the greater risk to
the insurer?
Definitely Jessie.
Jessie lives an unhealthy lifestyle; she stands a good chance of developing a
serious illness such as a heart condition for example.
All of these factors together mean that Jessie poses a higher risk of dying first
than Annie and is thus a greater risk to the insurer.
4.2.1 What does the underwriter do about risk?
For the insurer
In general the underwriter will:

identify aspects that increase the level of risk that the insurer can be
exposed to.

ensure that the life insured pays the correct premium for the level of
funeral cover.

impose necessary limitations on levels of cover.

impose exclusions.

impose a waiting period.

decline the application if necessary.
Because of the limited amount of cover that is bought under this type of policy,
the actual design of the product will incorporate these aspects into its pricing
structure to ensure that the products are viable for the business.
For the client

The underwriter needs to act responsibly when accepting the risk;
clients don’t want to find out at claims stage that the insurer cannot
meet its obligations.
© INSETA– Section 14 10b
53
4.3
VALIDITY OF THE FUNERAL INSURANCE POLICY
Over the past few years, the Ombudsman for Long-term Insurance has had to
deal with many complaints relating to the funeral claims that were not paid out
because the insurer claimed that the policy was not valid. Examples of reasons
that have led the policy to be regarded as invalid:

Signature on application form is not that of the policyholder

Non-disclosure of material information

Non-payment of premiums within the given period

Insured life wrongly described as spouse of principle assured
The Ombudsman for Long-term Insurance has published a document on his
website with helpful hints that will provide the client with some general
guidelines to follow when he is buying funeral insurance.
By following these
guidelines, you will ensure that you have a valid funeral policy. Some of these
guidelines are:

Making sure that the person selling the funeral insurance has a license
from the Financial Services Board, (FSB). The client is to make sure he
sees the license.

If there is an application form, the client should fill it in himself.
He
should make sure that he reads everything on the form. Especially the
fine print above his signature.

If there are any questions relating to his health or that of any of the
other life assureds on the policy, the client must make sure that he
discloses all the important information.

Importantly, the client should read the policy summary document that
he receives once the policy has been accepted to make sure that all his
details and that of the other lives insured on the policy are correct.

The client should ensure that his premiums are paid when due as per
the policy contract.
The “helpful hints” document can be downloaded from the website of the
Long-term Insurance Ombudsman at:
www.ombud.co.za/helpfulhints.asp
54
© INSETA– Section 14 10b
By ensuring that the client follows these guidelines, he can be sure that the
policy will be valid.
4.4
CLIENT AWARENESS
In the article “All you need to know about funeral insurance”, as well in the
article “10 things you should know about the policyholder protection rules”
written by Bruce Cameron and published on the Personal Finance website on 5
September 2003 and 21 March 2009 respectively, he mentions a few aspects
that the client should be aware of before they buy a funeral policy as well as
once they have bought the policy.
An aspect mentioned in this article relates to the fact that the company whose
policy the client is considering buying, is registered as a long-term insurer with
the FSB, and importantly is licensed to be able to sell funeral insurance.
There are many funeral businesses and administrators that are not registered
and don’t have the necessary license to be able to sell this type of business.
They are operating illegally.
Many of these operators initially pay out the
funeral claims to show their clients that they are legitimate businesses. Once
they have accumulated enough funds, they disappear or they go out of
business, thus leaving clients who have paid their premiums, to have nothing to
show for it.
In order to protect himself, the client should:

know who the insurer is that is underwriting the risk and make sure
they have a license.

confirm with the insurer that he, the client, is a registered policyholder
on their books.

ensure that the representative completes a needs analysis as is required
by the FAIS Act.

ensure that he receives a policy summary as discussed in Chapter 2 and
check the details therein to ensure that his details and that of his family
also insured on the policy are correct.
© INSETA– Section 14 10b
55
56
© INSETA– Section 14 10b
Summary
In this chapter we described the different role-players involved within the
funeral insurance environment.
We discussed the role of the underwriter in
some detail with regards to the function that they fulfil.
We also discussed
when a funeral policy would be regarded as valid and we looked at aspects that
will render a policy invalid. We also touched on the fact that the client must be
aware that many funeral policies are sold and administered by third parties,
many of whom are operating illegally because they are not registered and do
not have a license to operate in the industry.
Self-Assessment Questions
1.
The insurer will, in exchange for a premium:
a)
Manage a funeral scheme on behalf of a group of members
b)
Provide funeral cover for a client and his family
c)
Underwrite an application for funeral cover and accept the risk
d)
Advise the client on the most appropriate funeral cover solution
in respect of his needs
2.
The underwriter will:
a)
Manage a funeral scheme on behalf of a group of members
b)
Provide funeral cover for a client and his family
c)
Underwrite an application for funeral cover and accept the
risk
d)
Advise the client on the most appropriate funeral cover
solution in respect of his needs
3.
The policyholder is the owner of the policy and is
a)
Entitled to the benefits of the policy
b)
Responsible for the payment of the premiums of the policy
c)
Entitled to the benefits of the policy and is also responsible for
the payment of the premiums on the policy
d)
Entitled to the benefits of the policy and is responsible to
accepting the risk of the lives assured on the policy
© INSETA– Section 14 10b
57
4.
5.
Funeral insurance falls into the category of
a)
Long-term insurance business
b)
Short-term insurance
c)
Assistance business
d)
Reassurance business
Sarah is taking out a funeral policy for herself.
When taking out a
funeral policy,
a)
There will be no medical health checks or medical testing done,
however she will have to answer a few questions relating to her
state of health.
6.
b)
She will have to complete a health questionnaire
c)
She will be required to undergo a short medical examination
d)
She will be required to do a HIV/AIDS test
The role of the underwriter is to:
a)
Ensure that the insurer only insures young, healthy clients who
will live a long time
b)
Not to accept the risk of insuring old, unhealthy clients who will
only live a short time
c)
Ensure that the insurer is not exposed to risks that will result in
the insurer’s inability to pay out claims
d)
Ensure that the insurer is exposed to risks that will make them
more competitive in the funeral insurance market
7.
Alan has recently taken out a funeral policy for himself.
When he
completed the application form, he did not mention that he takes
part sky diving.
Alan dies in a sky diving accident 8 months after
taking out the policy. Alan’s funeral policy will
a)
Pay out because death was due to an accident
b)
Pay out because death occurred after the 6 months waiting
period
c)
Will not pay out due to non-disclosure of information
d)
Will not pay out because sky diving is generally excluded on
funeral policies
58
© INSETA– Section 14 10b
8.
Non-disclosure of information affects the risk of a policy will result
in:
9.
a)
A waiting period being imposed on the policy
b)
An exclusion of all accidental deaths
c)
An exclusion of all deaths relating to natural causes
d)
The non-payment of funeral benefits
Winnie took out a funeral policy for herself and her family.
At the
time of taking out the policy, Winnie had injured her right hand and
was unable to sign the policy application.
to sign the application on her behalf.
after a short illness.
She asked her husband,
A few years later, Winnie dies
When Winnie’s husband claims for the funeral
benefits, the insurer claims that the policy is not valid.
What could
the reason for this be?
a)
Winnie’s husband is not the beneficiary but actually the
policyholder and thus declares the policy invalid
b)
The insurer found that Winnie did not sign the original policy
application and thus declares the policy invalid
c)
Winnie was not insured for funeral benefits on the policy, only
her husband and children
d)
Winnie’s husband is not the beneficiary and thus cannot claim
the funeral benefits
10.
A policy can be regarded as invalid if:
a)
The insurer underwriting the funeral policy does not have a
license from the FSB to do so
b)
The client is registered as a policyholder on the Insurer’s
database
c)
The client has not read his policy summary and the details
therein are not correct
d)
The insurer underwriting the funeral policy does not send the
client a policy summary within the prescribed timeframe
© INSETA– Section 14 10b
59
Self-Assessment Answers
1.
The insurer will, in exchange for a premium:
a)
Manage a funeral scheme on behalf of a group of members
b)
Provide funeral cover for a client and his family
c)
Underwrite an application for funeral cover and accept the risk
d)
Advise the client on the most appropriate funeral cover solution
in respect of his needs
2.
The underwriter will:
a)
Manage a funeral scheme on behalf of a group of members
b)
Provide funeral cover for a client and his family
c)
Underwrite an application for funeral cover and accept the
risk
d)
Advise the client on the most appropriate funeral cover
solution in respect of his needs
3.
The policyholder is the owner of the policy and is
a)
Entitled to the benefits of the policy
b)
Responsible for the payment of the premiums of the policy
c)
Entitled to the benefits of the policy and is also responsible for
the payment of the premiums on the policy
d)
Entitled to the benefits of the policy and is responsible to
accepting the risk of the lives assured on the policy
4.
5.
Funeral insurance falls into the category of
a)
Long-term insurance business
b)
Short-term insurance
c)
Assistance business
d)
Reassurance business
Sarah is taking out a funeral policy for herself.
When taking out a
funeral policy,
a)
There will be no medical health checks or medical testing done,
however she will have to answer a few questions relating to her
state of health.
60
b)
She will have to complete a health questionnaire
c)
She will be required to undergo a short medical examination
d)
She will be required to do a HIV/AIDS test
© INSETA– Section 14 10b
6.
The role of the underwriter is to:
a)
Ensure that the insurer only insures young, healthy clients who
will live a long time
b)
Not to accept the risk of insuring old, unhealthy clients who will
only live a short time
c)
Ensure that the insurer is not exposed to risks that will result in
the insurer’s inability to pay out claims
d)
Ensure that the insurer is exposed to risks that will make them
more competitive in the funeral insurance market
7.
Alan has recently taken out a funeral policy for himself.
When he
completed the application form, he did not mention that he takes
part sky diving.
Alan dies in a sky diving accident 8 months after
taking out the policy. Alan’s funeral policy will
a)
Pay out because death was due to an accident
b)
Pay out because death occurred after the 6 months waiting
period
c)
Will not pay out due to non-disclosure of information
d)
Will not pay out because sky diving is generally excluded on
funeral policies
8.
Non-disclosure of information affects the risk of a policy will result
in:
9.
a)
A waiting period being imposed on the policy
b)
An exclusion of all accidental deaths
c)
An exclusion of all deaths relating to natural causes
d)
The non-payment of funeral benefits
Winnie took out a funeral policy for herself and her family.
At the
time of taking out the policy, Winnie had injured her right hand and
was unable to sign the policy application.
to sign the application on her behalf.
after a short illness.
She asked her husband,
A few years later, Winnie dies
When Winnie’s husband claims for the funeral
benefits, the insurer claims that the policy is not valid.
What could
the reason for this be?
a)
Winnie’s husband is not the beneficiary but actually the
policyholder and thus declares the policy invalid
b)
The insurer found that Winnie did not sign the original
policy application and thus declares the policy invalid
c)
Winnie was not insured for funeral benefits on the policy,
only her husband and children
© INSETA– Section 14 10b
61
d)
Winnie’s husband is not the beneficiary and thus cannot claim the
funeral benefits
10.
A policy can be regarded as invalid if:
a)
The insurer underwriting the funeral policy does not have a
license from the FSB to do so
b)
The client is registered as a policyholder on the Insurer’s
database
c)
The client has not read his policy summary and the details
therein are not correct
d)
The insurer underwriting the funeral policy does not send the
client a policy summary within the prescribed timeframe
62
© INSETA– Section 14 10b
© INSETA– Section 14 10b
63
Chapter
5
The role of the Ombudsman
This chapter covers the following criteria:
KNOWLEDGE CRITERIA:
Explain the role of the Life Ombudsman.
Explain how the Life Ombudsman deals with a complaint.
Explain what the complaint process is, included but not limited to:

how a complaint is lodged.

where a complaint should be lodged.
64
© INSETA– Section 14 10b
Purpose
In this chapter we will discuss what the Ombudsman for Long-term Insurance
does to help clients who are not happy with the advice and service relating to the
policy that they have received from an Insurer. We will also discuss the
complaints process by focusing on how clients lodge complaints and how the
Ombudsman resolves these complaints.
5.1
INTRODUCTION
In 1985, the office of the Ombudsman for Long-term Insurance was established
and a few years later the office of the Ombudsman for Financial Services
Providers was established.
These offices were established with the main
purpose of settling disagreements between the client and the Financial Services
Providers.
5.2
THE ROLE OF THE OMBUDSMAN FOR LONG-TERM INSURANCE
5.2.1
What does the Ombudsman for Long-term Insurance do?
The role of the Ombudsman for Long-term Insurance is to settle disputes
regarding insurance contracts between the insurers in the long-term insurance
industry and their clients, who are the policyholders.
Often policyholders who complain to the Ombudsman also take the complaint
further by taking the insurer to court, however the policyholder will not be able
to lodge a complaint with the Ombudsman and at the same time, take the
insurer to court.
This office often receives complaints relating to the following:

Administration problems experienced by the policyholders

The mis-selling of policies/products to policyholders

Policies that have lapsed and

Cases where the policyholders or beneficiaries feel the claims were
rejected unfairly.
© INSETA– Section 14 10b
65
5.2.2
What does the Ombudsman for Long-term Insurance not do?
The office for the Ombudsman for Long-term Insurance will not deal with any
complaints relating to:

the conduct of the representatives who sold policies after 1 October
2004.

administrative matters such as cancelling of policies.

short-term insurance.

unit trusts or other investments.

complaints where the policyholder has started legal proceedings.
5.3
THE COMPLAINT PROCESS
5.3.1
Whom should you contact first?
If the client is not happy about the service that they have received from the
insurer, the insurer should be given the chance to resolve the problem for him.
The first step in the complaints process is therefore to send a complaint to
insurer directly. Every insurer has an internal complaint process that the client
will need to follow.
5.3.2 How to complain to the Ombudsman for Long-term Insurance
If the client is not satisfied with the insurer’s response, he should then send a
complaint to the office of the Ombudsman for Long-term Insurance.
There are certain requirements that the client will need to adhere to.
These
requirements are as follows:

The client can either phone the office of the Ombudsman for Long-term
Insurance and with their assistance lodge a complaint with them or the
client can send the office of the Ombudsman for Long-term Insurance a
letter of complaint.

The client will need to provide the office of the Ombudsman with the
following information:
-
The policy number or numbers if there is more than one
policy
66
-
Details of the insurer
-
The policyholder’s contact details
© INSETA– Section 14 10b
-
The client must provide a short summary of the facts of the
complaint
-
If the client is lodging a complaint on behalf of the policyholder
or a beneficiary, a letter of mandate must also be sent in with
the complaint.

The client should also send copies of any documents or letters that he
might have mentioned in his complaint.

It is better to send a letter that has been typed, but if it is not possible,
it is then important that the client writes very neatly. If the letter is
going to be faxed to the Ombudsman for Long-term Insurance’s office,
it is best to use a black pen so that the writing on the letter is clear.

The client can send the complaint in his language of choice.
The contact details of the office of the Ombudsman for Long-term Insurance are
as follows:
Private Bag X45
Claremont
7735
Telephone number: (021) 657 5000
Fax number: (021) 674 0951
Email: info@ombud.co.za
It is important to note that lodging a complaint with the office of the
Ombudsman for Long-term Insurance will not cost the client anything.
5.3.3 How the Ombudsman for Long-term Insurance deals with complaints
Once the office of the Ombudsman for Long-term Insurance receives the
complaint, they will send a letter to the client acknowledging that they have
received the complaint and tell him what action they intend to take.
If the complaint falls within the scope of the Ombudsman, he will write a letter
to the client’s insurer and request that they investigate the client’s complaint.
The insurer will have six weeks to investigate the client’s complaint and send a
response to the office of the Ombudsman for Long-term Insurance.
Once the office of the Ombudsman for Long-term Insurance has received a
response from the insurer regarding the complaint, the Ombudsman will do the
following:

Make a decision regarding the facts presented by both the client and
the insurer and advise the client accordingly
© INSETA– Section 14 10b
67

If the Ombudsman is not able to make a decision, he might request
further information from either the client or insurer or even both parties
until a decision can be reached.
Depending on the Ombudsman’s decision, if there were sufficient grounds
regarding the complaint, the Ombudsman will order the insurer to take the
necessary steps to rectify the matter. If there were insufficient grounds
regarding the complaint, the Ombudsman might call for additional information
or he may dismiss the complaint entirely.
Summary
In this chapter we discussed the role of the Ombudsman for Long-term
Insurance and saw that his main role is to provide a way for disagreements
between clients and an insurer to be resolved.
Further we discussed the process that must be followed by the client to lodge a
complaint and have it resolved.
68
© INSETA– Section 14 10b
Self-Assessment Questions
1.
The role of the Ombudsman for Long-term Insurance is to settle
disagreements
between
clients
and
financial
services
providers
regarding:
2.
a)
unit trust and other investment contracts.
b)
short-term insurance contracts.
c)
long-term insurance contracts.
d)
the cancelling of long-term insurance contracts.
The Ombudsman for Long-term Insurance can deal with complaints
regarding:
3.
a)
mis-selling of long-term insurance products.
b)
mis-selling of unit trust and investment products.
c)
conduct of representatives who sold products after 01/10/2004.
d)
conduct of representatives who sold products after 01/11/2004.
When a client lodges a complaint to the Ombudsman of Long-term
Insurance, it must be done by:
a)
writing a letter and sending a copy of the insurer’s final
response.
b)
writing a letter in English only.
c)
completing a complaint registration form and sending a copy of
the insurer’s final response.
d)
4.
sending a copy of the insurer’s final response only.
The cost for lodging a complaint with the Ombudsman for Long- term
Insurance:
5.
a)
A standard administration fee
b)
There is no cost
c)
A fee as determined by the Ombudsman
d)
A fee as determined by the insurer
Mr
Nkosi
sent
the
office
of
the
Ombudsman
for
Long-term
Insurance a complaint regarding a claim that was rejected by his
insurer. The office will send a letter to:
a)
Mr
Nkosi’s
financial
services
provider
requesting
an
investigation into Mr Nkosi’s complaint.
© INSETA– Section 14 10b
69
b)
Mr Nkosi’s financial services provider informing them that this
complaint does not fall within the scope of the Ombudsman’s
office.
c)
Mr Nkosi acknowledging that they have received the complaint.
d)
Mr Nkosi informing him that the complaint does not fall within
the scope of the Ombudsman.
6.
Zuma received a letter in which ABC Funeral Insurers informed him
that the funeral claim he submitted recently was rejected because
the policy is not valid.
Zuma is very unhappy with the insurer’s
decision and wishes to complain. Zuma should approach:
7.
a)
The office of the Ombudsman for Long-term Insurance first
b)
The office of the FAIS Ombudsman first
c)
The complaints department of ABC Funeral Insurers first
d)
The CEO of ABC Funeral Insurers first
Suzie took out a funeral policy on 1 November 2004. She is
unhappy about the service that she received from the
representative
who sold her the policy as well as from the Insurer.
Suzie sends a
complaint to the office of the Ombudsman for Long-term Insurance.
The Ombudsman informs her that
a)
The office will take up the matter with her insurer and attempt
to resolve it
b)
The office will write a letter to the insurer in which it requests
immediate investigation into the matter
c)
The office will inform the insurer of the request but will not deal
with the complaint
d)
The office does not deal with complaints relating to the conduct
of the representatives who sold policies after 1 October 2004
8.
Devon finds it very difficult to write a letter in English.
He wants to
know if he can write his letter of complaint to the Ombudsman for
Long-term Insurance in his home language?
9.
a)
No, complaint letter may only be written in English
b)
No, complaint letter may only be written in Afrikaans
c)
Yes, as long as it is either Sotho, Zulu or Xhosa
d)
Yes, he can write a letter in any of the 11 official languages
When a client submits a letter of complaint to the Ombudsman for
Long-term Insurance’s office, he is required to send in a copy of:
70
a)
His ID document as well
b)
A summary of his personal details as well
© INSETA– Section 14 10b
10.
c)
The insurers response letter to the clients complaint
d)
His policy contract
When a client lodges a complaint with the Ombudsman for Longterm Insurance’s office, the office will accept letters that are:
a)
Typed only
b)
Handwritten in black pen only
c)
Handwritten in blue pen only
d)
Typed or handwritten, preferable in black pen
© INSETA– Section 14 10b
71
Self-Assessment Answers
1.
The role of the Ombudsman for Long-term Insurance is to settle
disagreements
between
clients
and
financial
services
providers
regarding:
2.
a)
unit trust and other investment contracts.
b)
short-term insurance contracts.
c)
long-term insurance contracts.
d)
the cancelling of long-term insurance contracts.
The Ombudsman for Long-term Insurance can deal with complaints
regarding:
3.
a)
mis-selling of long-term insurance products.
b)
mis-selling of unit trust and investment products.
c)
conduct of representatives who sold products after 01/10/2004.
d)
conduct of representatives who sold products after 01/11/2004.
When a client lodges a complaint to the Ombudsman of Long-term
Insurance, it must be done by:
a)
writing a letter and sending a copy of the insurer’s final
response.
b)
writing a letter in English only.
c)
completing a complaint registration form and sending a copy of
the insurer’s final response.
d)
4.
sending a copy of the insurer’s final response only.
The cost for lodging a complaint with the Ombudsman for Long- term
Insurance:
72
a)
A standard administration fee
b)
There is no cost
c)
A fee as determined by the Ombudsman
d)
A fee as determined by the insurer
© INSETA– Section 14 10b
5.
Mr
Nkosi
sent
the
office
of
the
Ombudsman
for
Long-term
Insurance a complaint regarding a claim that was rejected by his
insurer. The office will send a letter to:
a)
Mr
Nkosi’s
financial
services
provider
requesting
an
investigation into Mr Nkosi’s complaint.
b)
Mr Nkosi’s financial services provider informing them that this
complaint does not fall within the scope of the Ombudsman’s
office.
c)
Mr Nkosi acknowledging that they have received the complaint.
d)
Mr Nkosi informing him that the complaint does not fall within
the scope of the Ombudsman.
6.
Zuma received a letter in which ABC Funeral Insurers informed him
that the funeral claim he submitted recently was rejected because
the policy is not valid.
Zuma is very unhappy with the insurer’s
decision and wishes to complain. Zuma should approach:
7.
a)
The office of the Ombudsman for Long-term Insurance first
b)
The office of the FAIS Ombudsman first
c)
The complaints department of ABC Funeral Insurers first
d)
The CEO of ABC Funeral Insurers first
Suzie took out a funeral policy on 1 November 2004.
unhappy about the service that she received from the
who sold her the policy as well as from the Insurer.
She is
representative
Suzie sends a
complaint to the office of the Ombudsman for Long-term Insurance.
The Ombudsman informs her that
a)
The office will take up the matter with her insurer and
attempt to resolve it
b)
The office will write a letter to the insurer in which it requests
immediate investigation into the matter
c)
The office will inform the insurer of the request but will not deal
with the complaint
d)
The office does not deal with complaints relating to the conduct
of the representatives who sold policies after 1 October 2004
© INSETA– Section 14 10b
73
8.
Devon finds it very difficult to write a letter in English.
He wants to
know if he can write his letter of complaint to the Ombudsman for
Long-term Insurance in his home language?
9.
a)
No, complaint letter may only be written in English
b)
No, complaint letter may only be written in Afrikaans
c)
Yes, as long as it is either Sotho, Zulu or Xhosa
d)
Yes, he can write a letter in any of the 11 official languages
When a client submits a letter of complaint to the Ombudsman for
Long-term Insurance’s office, he is required to send in a copy of:
10.
a)
His ID document as well
b)
A summary of his personal details as well
c)
The insurers response letter to the clients complaint
d)
His policy contract
When a client lodges a complaint with the Ombudsman for Longterm Insurance’s office, the office will accept letters that are:
74
a)
Typed only
b)
Handwritten in black pen only
c)
Handwritten in blue pen only
d)
Typed or handwritten, preferable in black pen
© INSETA– Section 14 10b
© INSETA– Section 14 10b
75
References
Article:
“All you need to know about funeral assurance” by Bruce Cameron, published
on the Personal Finance website 5 September 2003.
“10 things you should know about the policyholder protection rules” by Bruce
Cameron, published on the Personal Finance website 21 March 2009.
Helpful hints document published on the Ombudsman for Long-Term
Insurance website
www.ombud.co.za/helpfulhints.asp
LOA Code of Conduct: Chapter 19: Code on Assistance Business (20 February
2001). (www.asisa.co.za )
Funeral Insurance: A perception from the Office of the Ombudsman for Longterm Insurance. (www.ombud.co.za )
http://www.ombud.co.za/whatwedo.asp
http://www.ombud.co.za/howtocomplain.asp
http://www.faisombud.co.za
Useful websites
www.ombud.co.za
www.faisombud.co.za
www.fsb.co.za
www.persfin.co.za
http://www.ombud.co.za/whatwedo.asp
http://www.ombud.co.za/howtocomplain.asp
http://www.faisombud.co.za
www.asisa.co.za
www.avbob.co.za
www.assupol.co.za
www.oldmutual.co.za
www.sanlam.co.za
76
© INSETA– Section 14 10b
© INSETA– Section 14 10b
77
Self-Assessment Test
Questions
The following questions are similar in format and content to those you may
find in the exam. Do not only study these questions, but ensure that you
cover the contents of your notes thoroughly.
78
© INSETA– Section 14 10b
© INSETA– Section 14 10b
79
Self-Assessment Questions
1.
Freddy has a funeral policy and he has missed the first premium of the
policy.
Freddy has between __________ days in which to pay the
premium or else the policy might lapse.
2.
a)
7 to 10
b)
7 to 14
c)
15 to 20
d)
15 to 31
The period a client has in which the missed premium must be paid is
known as:
3.
a)
Extended period
b)
Grace period
c)
Premium extension
d)
Grace days
Susan has a funeral policy and has not been able to pay the premium of
the policy within the stipulated period. This policy will:
4.
a)
Continue for a further 6 months and then lapse
b)
Provide cover that will pay out if Susan dies in a accident
c)
Provide cover that will pay out no matter how Susan dies
d)
Lapse or be cancelled
When the insurer accepts the policy, the client should receive a policy
summary within:
80
a)
7 days after the policy has been accepted
b)
15 days after the policy has been accepted
c)
30 days after the policy has been accepted
d)
45 days after the policy has been accepted
© INSETA– Section 14 10b
5.
Sam took out a funeral policy recently and his adviser told him to make
sure that he reads the policy summary as soon as he receives it. Why
did the adviser tell Sam to do this?
a)
To ensure that Sam knows when the premium of the policy is
due
b)
To ensure that Sam knows who to contact when he has a claim
on the policy
c)
To ensure that Sam knows his rights and obligations on the
policy
d)
6.
To ensure that Sam knows when the policy will pay out
Andy took out a funeral policy recently and once the policy was
accepted he was sent a:
7.
a)
Product brochure
b)
Policy summary
c)
Welcome letter
d)
Policy quotation
The insurer will:
a)
manage a funeral scheme on behalf of a group of members
b)
provide funeral cover for a client and his family
c)
underwrite an application for funeral cover and accept the risk
d)
advise the client on the most appropriate funeral cover solution
in respect of his needs
8.
Candice recently took out a funeral policy for her and her family. As the
owner of the policy she is:
a)
entitled to the benefits of the policy
b)
responsible for the payment of the premiums of the policy
c)
entitled to the benefits of the policy and is also responsible for
the payment of the premiums on the policy
d)
entitled to the benefits of the policy and is responsible to
accepting the risk of the lives assured on the policy
9.
The maximum amount of cover that the Minister prescribes under
Assistance Business policies is:
a)
R10 000
b)
R18 000
c)
R20 000
d)
R30 000
© INSETA– Section 14 10b
81
10.
Peter is taking out a funeral policy for himself and his parents. When
taking out a funeral policy:
a)
they will all be required to undergo a short medical examination
b)
they will all be required to do a HIV/AIDS test
c)
there is no underwriting, only a few questions relating to their
state of health
d)
there is no underwriting and no questions relating to their
health
11.
Petrus has recently taken out a funeral policy for himself.
When he
completed the application form, he did not mention that he takes part in
offroad biking. Petrus dies in a biking accident 8 months after taking
out the policy. Petrus’s funeral policy will:
a)
not pay out due to non-disclosure of information
b)
not pay out because offroad biking is generally excluded on
funeral policies
c)
pay out because his death was due to an accident
d)
pay out because his death occurred after the 6 month waiting
period
12.
In order to protect himself against unscrupulous providers, the client
should make sure that:
a)
the insurer underwriting the funeral insurance policy is licensed
by the FSB
13.
14.
82
b)
the insurer issues a receipt for each premium that he pays
c)
he receives a update on the details of his policy every 6 months
d)
the insurer renews his license with the FSB every year
Funeral insurance is usually NOT sold in the following way:
a)
By banks
b)
By retail stores
c)
By insurers
d)
By employers
Funeral policies may NOT cover the following parties:
a)
The policy owner
b)
The policy owner’s friends
c)
The policy owner’s immediate family
d)
The policy owner’s extended family
© INSETA– Section 14 10b
15.
16.
A waiting period is a period during which:
a)
limited insured benefits only are paid out
b)
no insured benefits are paid out
c)
insured benefits as specified in the contract are paid out
d)
there is a delay on the payment of insured benefits
A suicide exclusion means that if the insured life commits suicide the
benefit will:
a)
only pay out 12 months after his death
b)
only pay out after an investigation by the insurer’s forensic
unit
17.
c)
not pay out at all
d)
not pay out to anyone other than the insured’s spouse
Some of the benefits for groups purchasing funeral policies on behalf
of their staff or members is that they can negotiate _______ to meet
the needs of members.
18.
a)
levels of cover
b)
premiums
c)
cover in addition to R10 000 for children under 6 years
d)
policy benefits
Funeral policies are classified as follows in terms of the Long-term
Insurance Act:
19.
a)
Life policy
b)
Sinking fund policy
c)
Assistance policy
d)
Fund policy
Steven (24) wishes to take out a funeral policy on his own life with the
maximum cover allowed. Cover on this policy may not exceed:
a)
R10 000
b)
R30 000
c)
R18 000
d)
R36 000
© INSETA– Section 14 10b
83
20.
Xoliswa took out a funeral policy on her own life two months ago and
the insurer applied a waiting period of 6 months.
If Xoliswa dies
today the insurer will:
a)
pay the full benefit to the beneficiary within 48 hours
b)
pay one third of the benefits as one third of the waiting period
has expired
c)
pay no benefit but refund the premiums
d)
pay the full benefit to the beneficiary after expiry of the
waiting period
21.
On the death of the life insured the following must happen first:
a)
The funeral must be conducted and proof supplied to the
insurer
b)
The beneficiary under the policy must provide proof of the
beneficiary nomination to the insurer
22.
c)
The insurer must be informed of the death of the life insured
d)
The insurer must investigate the death of the life insured
If the beneficiary of a funeral policy wishes to submit a claim the
following documentation need NOT be supplied:
23.
24.
a)
Originally certified copy of the deceased’s ID
b)
Originally certified copy of the beneficiary’s ID
c)
Proof of the beneficiary’s bank details
d)
Proof of the deceased’s bank details
Benefits on a funeral policy will usually pay out within:
a)
72 hours
b)
12 months
c)
48 hours
d)
24 hours
The FAIS Act prescribes that
the insurer must
keep records
regarding the payment of a claim:
a)
For a maximum of 5 years after payment of the claim
b)
For a minimum of 7 years if the deceased died an accidental
death
c)
For a minimum of 5 years after payment of the claim
d)
For a maximum of 3 years if records are stored at an off-site
facility
84
© INSETA– Section 14 10b
25.
The requirement for record-keeping set by FAIS prescribes that:
a)
The insurer must store all records on its premises
b)
The insurer must store records off-site only with special
permission
c)
The insurer must store records in an appropriate facility which
cannot be destroyed
d)
The insurer must store records in electronic format only with
special permission
26.
The Office of the Ombudsman for Long-term Insurance is created
by the following legislation:
27.
a)
The FAIS Act
b)
The Long-term Insurance Act
c)
The Policyholder Protection Rules
d)
The FAIS General Code of Conduct
The Ombudsman for Long-term Insurance may deal with any
complaints relating to:
28.
a)
Long-term and short-term insurance policies
b)
Long-term insurance policies only
c)
Unit trust investments
d)
Poor advice provided by representatives of long-term insurers
John is the policyholder of a funeral policy on his own life.
The
insurer, Company X, has suspended John’s benefits without any
reason. John must pursue the following process if he wants to
lodge
a complaint:
29.
a)
Lodge his complaint with Company X
b)
Lodge his complaint with the FAIS Ombud
c)
Lodge his complaint with the Ombud for Long-term Insurance
d)
Lodge his complaint with the Financial Services Board
In
order
to
investigate
a
claim
the
Ombud
for
Long-term
Insurance requires the following information:
a)
Details of the policyholder, details of the insurer and the policy
number
b)
Details of the policyholder and the policy number
c)
Details of the insurer and the policy number
d)
Details of the policyholder and details of the insurer
© INSETA– Section 14 10b
85
30.
The policyholder may lodge the complaint to the Ombud for Longterm Insurance in:
86
a)
English only
b)
The language specified in the contract only
c)
The language of choice of the policyholder
d)
The language as instructed by the Ombud
© INSETA– Section 14 10b
© INSETA– Section 14 10b
87
Self-Assessment Answers
1.
Freddy has a funeral policy and he has missed the first premium of the
policy.
Freddy has between __________ days in which to pay the
premium or else the policy might lapse.
2.
a)
7 to 10
b)
7 to 14
c)
15 to 20
d)
15 to 31
The period a client has in which the missed premium must be paid is
known as the:
3.
a)
Extended period
b)
Grace period
c)
Premium extension
d)
Grace days
Susan has a funeral policy and has not been able to pay the premium of
the policy within the stipulated period. This policy will:
4.
a)
Continue for a further 6 months and then lapse
b)
Provide cover that will pay out if Susan dies in a accident
c)
Provide cover that will pay out no matter how Susan dies
d)
Lapse or be cancelled
When the insurer accepts the policy, the client should receive a policy
summary within:
5.
a)
7 days after the policy has been accepted
b)
15 days after the policy has been accepted
c)
30 days after the policy has been accepted
d)
45 days after the policy has been accepted
Sam took out a funeral policy recently and his adviser told him to make
sure that he reads the policy summary as soon as he receives it. Why
did the adviser tell Sam to do this?
a)
To ensure that Sam knows when the premium of the policy is
due
b)
To ensure that Sam knows who to contact when he has a claim
on the policy
c)
To ensure that Sam knows his rights and obligations on the
policy
d)
88
To ensure that Sam knows when the policy will pay out
© INSETA– Section 14 10b
6.
Andy took out a funeral policy recently and once the policy was
accepted he was sent a:
7.
a)
Product brochure
b)
Policy summary
c)
Welcome letter
d)
Policy quotation
The insurer will:
a)
manage a funeral scheme on behalf of a group of members
b)
provide funeral cover for a client and his family
c)
underwrite an application for funeral cover and accept the risk
d)
advise the client on the most appropriate funeral cover solution
in respect of his needs
8.
Candice recently took out a funeral policy for her and her family. As the
owner of the policy she is:
a)
entitled to the benefits of the policy
b)
responsible for the payment of the premiums of the policy
c)
entitled to the benefits of the policy and is also responsible for
the payment of the premiums on the policy
d)
entitled to the benefits of the policy and is responsible to
accepting the risk of the lives assured on the policy
9.
The maximum amount of cover that the Minister prescribes under
Assistance Business policies is:
10.
a)
R10 000
b)
R18 000
c)
R20 000
d)
R30 000
Peter is taking out a funeral policy for himself and his parents. When
taking out a funeral policy:
a)
they will all be required to undergo a short medical examination
b)
they will all be required to do a HIV/AIDS test
c)
there is no underwriting, only a few questions relating to their
state of health
d)
there is no underwriting and no questions relating to their
health
© INSETA– Section 14 10b
89
11.
Petrus has recently taken out a funeral policy for himself.
When he
completed the application form, he did not mention that he takes part in
offroad biking. Petrus dies in a biking accident 8 months after taking
out the policy. His funeral policy will:
a)
not pay out due to non-disclosure of information
b)
not pay out because off road biking is generally excluded on
funeral policies
c)
pay out because his death was due to an accident
d)
pay out because his death occurred after the 6 months waiting
period
12.
In order to protect himself against unscrupulous providers, the client
should make sure that:
a)
the insurer underwriting the funeral insurance policy is licensed
by the FSB
b)
the insurer issues a receipt for each premium that he pays
c)
he receives an update on the details of his policy every 6
months
d)
13.
14.
15.
90
the insurer renews his license with the FSB every year
Funeral insurance is usually NOT sold in the following way:
a)
by banks
b)
by retail stores
c)
by insurers
d)
by employers
Funeral policies may NOT cover the following parties:
a)
the policy owner
b)
the policy owner’s friends
c)
the policy owner’s immediate family
d)
the policy owner’s extended family
A waiting period is a period during which:
a)
limited insured benefits only are paid out
b)
no insured benefits are paid out
c)
insured benefits as specified in the contract are paid out
d)
there is a delay on the payment of insured benefits
© INSETA– Section 14 10b
16.
A suicide exclusion means that if the insured life commits suicide the
benefit will:
a)
only pay out 12 months after his death
b)
only pay out after an investigation by the insurer’s forensic
unit
17.
c)
not pay out at all
d)
not pay out to anyone other than the insured’s spouse
Some of the benefits for groups purchasing funeral policies on behalf
of their staff or members is that they can negotiate _______ to meet
the needs of members.
18.
a)
levels of cover
b)
premiums
c)
cover in addition to R10 000 for children under 6 years
d)
policy benefits
Funeral policies are classified as follows in terms of the Long-term
Insurance Act:
19.
a)
Life policy
b)
Sinking fund policy
c)
Assistance policy
d)
Fund policy
Steven (24) wishes to take out a funeral policy on his own life with the
maximum cover allowed. Cover on this policy may not exceed:
20.
a)
R10 000
b)
R30 000
c)
R18 000
d)
R36 000
Xoliswa took out a funeral policy on her own life two months ago and
the insurer applied a waiting period of 6 months.
If Xoliswa dies
today the insurer will:
a)
pay the full benefit to the beneficiary within 48 hours
b)
pay one third of the benefits as one third of the waiting period
has expired
c)
pay no benefit but refund the premiums
d)
pay the full benefit to the beneficiary after expiry of the
waiting period
© INSETA– Section 14 10b
91
21.
On the death of the life insured the following must happen first:
a)
The funeral must be conducted and proof supplied to the
insurer
b)
The beneficiary under the policy must provide proof of the
beneficiary nomination to the insurer
22.
c)
The insurer must be informed of the death of the life insured
d)
The insurer must investigate the death of the life insured
If the beneficiary of a funeral policy wishes to submit a claim the
following documentation need NOT be supplied:
23.
24.
a)
Originally certified copy of the deceased’s ID
b)
Originally certified copy of the beneficiary’s ID
c)
Proof of the beneficiary’s bank details
d)
Proof of the deceased’s bank details
Benefits on a funeral policy will usually pay out within:
a)
72 hours
b)
12 months
c)
48 hours
d)
24 hours
The FAIS Act prescribes that
the insurer must
keep records
regarding the payment of a claim:
a)
For a maximum of 5 years after payment of the claim
b)
For a minimum of 7 years if the deceased died an accidental
death
c)
For a minimum of 5 years after payment of the claim
d)
For a maximum of 3 years if records are stored at an off-site
facility
25.
The requirement for record-keeping set by FAIS prescribes that:
a)
The insurer must store all records on its premises
b)
The insurer must store records off-site only with special
permission
c)
The insurer must store records in an appropriate facility which
cannot be destroyed
d)
The insurer must store records in electronic format only with
special permission
92
© INSETA– Section 14 10b
26.
The Office of the Ombudsman for Long-term Insurance is created
by the following legislation:
a)
27.
The FAIS Act
b)
The Long-term Insurance Act
c)
The Policyholder Protection Rules
d)
The FAIS General Code of Conduct
The Ombudsman for Long-term Insurance may deal with any
complaints relating to:
28.
a)
Long-term and short-term insurance policies
b)
Long-term insurance policies only
c)
Unit trust investments
d)
Poor advice provided by representatives of long-term insurers
John is the policyholder of a funeral policy on his own life.
The
insurer, Company X, has suspended John’s benefits without any
reason. John must follow the following process if he wants to
lodge
a complaint:
29.
a)
Lodge his complaint with Company X
b)
Lodge his complaint with the FAIS Ombud
c)
Lodge his complaint with the Ombud for Long-term Insurance
d)
Lodge his complaint with the Financial Services Board
In
order
to
investigate
a
claim
the
Ombud
for
Long-term
Insurance requires the following information:
a)
Details of the policyholder, details of the insurer and the policy
number
30.
b)
Details of the policyholder and the policy number
c)
Details of the insurer and the policy number
d)
Details of the policyholder and details of the insurer
The policyholder may lodge the complaint to the Ombud for Longterm Insurance in:
a)
English only
b)
The language specified in the contract only
c)
The language of choice of the policyholder
d)
The language as instructed by the Ombud
© INSETA– Section 14 10b
93