Regulators begin funeral insurance review

Financial regulators have started a comprehensive review of the legal framework governing funeral insurance in SA. The Financial Sector Conduct Authority (FSCA) and the Prudential Authority note that the regulatory review is in response to increasing concerns among authorities and funeral parlour industry representatives about the effectiveness and appropriateness of the current regulations. Moneyweb reports that the funeral insurance sector is valued at between R15bn and R20bn annually. According to the June 2024 statistics from the Association for Savings and Investment SA (Asisa), 15m of the 35.2m risk policies in the country were funeral products. Although there is a regulatory framework in place, there are several illegal and unscrupulous operators in the market. Funeral claims and misrepresentation of funeral policies count among the highest incidences of insurance fraud in the country. Asisa’s latest available statistics show that in 2023, there were 2 561 incidents of funeral claims fraud, involving 503 clients and 1 953 policies. The province with the highest incidence of funeral claim fraud was KZN with 742 incidents.

In 2011, National Treasury published a document setting out its policy position to promote better access for South Africans to affordable insurance products through the introduction of a Microinsurance (MI) Policy Framework. This included allowing informal providers, such as funeral parlours to make insurance available to consumers. Moneyweb notes that the aim of the framework was also to protect consumers against abuses and exploitation in the funeral insurance market. Despite these interventions, the existence of an unlicensed funeral insurance market and ‘prevailing poor practices’ in the distribution of funeral insurance, even within the licensed market, are concerning to the FSCA and the Prudential Authority.

Full Moneyweb report