Annual Report Highlights Persistent Issues in Funeral and Short-Term Insurance Policies as Complaints Surge
The Financial Advisory and Intermediary Services (FAIS) Ombud has reported that complaints concerning funeral policies accounted for the majority of grievances handled in the 2023/24 financial year, according to its annual report. Issues with funeral policy claims were followed closely by complaints related to short-term insurance for homes and vehicles, as well as concerns over investments, retirement, and foreign exchange transactions.
Cryptocurrency fraud complaints also emerged, primarily involving consumers who invested through social media advertisements but received no returns. “Consumers made payments based on cryptocurrency investment advertisements on social media and received nothing in return. The office was unable to assist unless a registered financial services provider is involved in the transaction,” the report noted.
In total, the Ombud received 10,574 complaints, of which 4,501 were resolved, while others were redirected to relevant Ombud schemes. Non-payment of claims and fraudulent or unauthorised policies represented the bulk of the complaints. Settlements from these cases amounted to R39 million for the financial year.
Advocate John Simpson of FAIS outlined the agency’s efforts to address long-standing issues with case management. “The office subsequently identified hundreds of active cases on our system that were up to 10 years old and had never been successfully resolved. All these matters were subsequently resolved and closed,” he stated.
In the past year, FAIS handled a total of 5,046 justiciable complaints, including those carried over from prior years, with 1,772 complaints successfully settled during the period. The settlement ratio rose to 35%, up from 29.24% in the previous year, yielding an overall settlement value of R39,525,923—an increase from R39,133,121 in 2022/23.
Among the highlighted cases was a complaint involving a woman who filed a claim for her stolen Land Cruiser, only for the insurance company to deny it due to the vehicle lacking a satellite tracking device. “The vehicle was stolen from her place of employment on 30 July 2018. The complainant submitted a claim with the insurer for R312,400.00, which was rejected because the complainant’s stolen vehicle did not have a satellite early warning device. The complainant submitted that she was unaware of the requirement.”
The report found the insurer had failed to adequately inform the complainant of this requirement, with no proof of notification provided. “A determination was issued, ordering the insurer to pay the complainant the amount of R301,466 and interest on the said amount at a rate of 11.75% per annum,” the Ombud’s report stated.
Another case detailed a dispute over a funeral policy claim for a R40,000 benefit, denied by the insurer on grounds that the claimant’s cousin had died within the policy’s six-month waiting period. However, the report concluded that the waiting period had lapsed before the death occurred. “A determination was issued ordering the respondent to pay the complainant the amount of R40,000 and interest on the said amount at a rate of 11.75% per annum,” the report noted.
Professor Irrshad Kaseeram from the University of Zululand’s Economics Department commended FAIS for improving its resolution ratio. “The United Kingdom has a 37% resolution rate, while the US’s overall response rate is 81% and (in the US) respondents to complainants have a limited time to respond by law. Hence the resolution rates are much higher than in SA and the UK.”
This report underscores the persistent challenges in consumer protections within the insurance and financial sectors and highlights the growing need for rigorous oversight and transparent communication to protect consumers.