No More Funeral Cover Sales to South Africa’s Poor
News in from Johannesburg is that government legislature, to guard against the financial abuse and burdening of very low-income households, plans to bar funeral insurance companies from selling their products to receivers of social grants. Multi-Billionaire companies and big name insurers and underwriters, as well as their subsidiaries, are implicated. Their services are to social grants recipients, and funds for children’s very basic needs are now for funeral cover sales.
This money is sometimes drawn directly from the grant. It’s illegal, and government can implement mechanical measures that stop this from happening. The plan is to initiate funeral cover that is run by the government. That was raised in parliament by the Social Development government department.
Funeral Cover Sales
Some vocal citizen communities have spoken very strongly against this and have asked for government intervention. Some insurers, mainly Lion of Africa and Sanlam are still battling the matter in court. In the meantime, their processes regarding the funeral policies in this income bracket are still ongoing.
Government grants are for providing basic needs and bridging the gap between the lower middle class and the very poor, who are young or very old. With no steady income earner in the household and therefore very poor.
According to the social grant insured parties, insurance companies end up deducting monies for services unbeknown to them and not agreed upon over and above the funeral cover deductions. This practice is what has sparked the outcry. Some insurers, however, claim that even with the ban and if the government were to inhibit them from withdrawing the funds physically. These individuals could still purchase the cover upon withdrawal of the grant as nothing in the law prevents them from buying the cover.
Laws – Funeral Cover Sales
The law permits maximum deductions of 10% of the grant payout is only for one funeral policy. Companies make huge profits from this bracket as the insured children have very small chances of dying while receiving grants. So the payout likelihood is very minimal, sitting statistically at 1% of that population. It is a very low risk, high return market, which they will not let go of easily. The insurer, Lion of Africa, however, claims that it is a high-risk sector as the policy covers up to 8 people in a family, where the pay-out rate is usually three times more than normal. The government, however, aims to clamp down hard by law to practice the practice.
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All info was correct at time of publishing