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Claims rejected due to rogue funeral parlours

By Staff Writer
By Angelique Ruzicka, editor,

‘Rogue’ funeral administrators, which collect premiums in behalf of insurance companies, are not paying over these premiums to insurance companies.  This means that clients will come in for a nasty surprise when they need to claim. “This inevitably leads to a cancellation of the policy by the insurer and non-payment of any benefit to the life insured’s family,” points out Long-term insurance Ombudsman Judge Ron McLaren.

Judge McLaren conveyed these findings in the Ombudsman for Long Term Insurance’s annual report for 2013. The report explains that the funeral insurer designs the product in such a way that the policyholder is not the life insured/member of the group policy, but instead the policyholder is the funeral parlour which markets the product.

This means that the consumer is not in a contractual relationship with the insurer, which makes it impossible for the Ombud to deal with complaints if the funeral parlour refuses to pay out come claim time. “The life insured, therefore, only has recourse against the funeral parlour,” says the Ombudsman in the report.

He added: “Unfortunately, there are some operators in the market that can only be described as dishonest. These are administrators or funeral parlours or intermediaries which do not play by the rules. They tend not to pay over premiums or not all the premiums collected from clients.” 

Worryingly, the Ombudsman points out that insurers still underwrite such group schemes despite the fact that some schemes change insurance provider (after non-payment and subsequent cancellation) up to three or four times a year. 
“It would be so much more prudent of all insurers did some type of due diligence check before taking over group schemes,” said the Ombudsman. 

Hospital cash plan complaints on the rise
Figures in the 2013 report also revealed that complaints in the healthcare category relating mostly to hospital cash plans have jumped from 9% in 2011 to 20% in 2013. The Ombudsman said the increase in complaints stems from excessive claims under these policies, which he views as a concern.

Complaining socially
Consumers were successfully making use of social media channels to garner attention for complaints and to get them resolved. “People are using social media to voice their dissatisfaction with financial institutions and it is increasingly being seen as an alternative to the more traditional forms of consumer recourse,” said Judge McLaren. “Financial institutions tend to react swiftly to social media complaints because of the threat of negative publicity, which in turn encourages the use of this as a medium of complaint resolution.”

The number of complaints launched with the Long-term Insurance Ombudsman reached a total of 10,028 in 2013, an increase of 4.5% over 2012. In 2013 the office finalised 4496 full cases with 77% of the cases finalised within six months. The office recovered R103, 8 million in lump sums for complainants over the past year with 33% of cases resolved wholly or partially in favour of complainants. Compensation of R323, 741 was granted to consumers for poor service. 

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