Settled Complaint

30 March 2022 Office of the Ombud for Financial Services Providers

The Office of the FAIS Ombud (“the Office”) is committed to resolving complaints in a procedurally fair, informal, economical and expeditious manner, with reference to what is equitable in all circumstances.

In order to execute on this commitment, the Office always explores every available avenue to resolve complaints between parties on an informal basis without the need to resort to formal resolution by way of a determination.

The Office recognises that a settlement agreement entered into in order to resolve a complaint via a conciliation process is concluded on a confidential basis. This manner of resolution is also much preferred by the Office whenever possible because it is an expeditious process, it does not expose the parties to legal costs and it lends itself towards the integrity required between consumers and financial services providers that can lead to the requisite confidence of consumers in the financial services industry. Further, some of the issues that arise give the Ombud an opportunity to highlight to the whole industry specific concerns that arise every now and again.

The settlement that has been anonymously sketched below is in respect of a funeral policy and the financial prejudice that can be experienced by consumers of these policies if they are not appropriately advised and/or informed. The specific aspect that was highlighted by this complaint is in respect of the failure by the respondent’s representative to have adequately catered for the complainant’s needs, as no needs analysis was conducted that would have prevented the claim from having been rejected. Many who read this will question the requirement for a needs analysis being conducted for a funeral policy, due to the fact that when applying for a funeral policy, no medical underwriting is conducted by the insurer to determine the potential risk presented by the lives assured. The risk is therefore managed by risk management measures such as waiting periods, exclusions and etc. Herein however lies the problem, as the common misconception held by many FSPs and their representatives is that the application in respect of a funeral policy represents a single need, and as there is no underwriting conducted at application stage, the application process is a straightforward matter that simply involves selecting a plan that provides the desired benefit at a specific premium and ensuring that the beneficiaries and lives assured are captured on the application form.

Nothing can be further from the truth, and this reliance on a single need (First addressed in the 2020/2021 FAIS Ombud Annual Report), and failure to provide the client with an appropriate recommendation (as detailed in the FAIS Ombud Annual Report for 2021/2022.) are invariably the causes a number of funeral policy complaints get rejected at claims stage, where the main members are caught unaware by issues that should have, and could have been addressed during the application stage, had the FSPs looked to comply with the provisions of the General Code of Conduct for Authorised Financial Services Providers and Representatives (‘the Code’) (You are invited to visit our website at and read further on the various trends identified in our previous annual reports as well as to peruse our newsletters and determinations, which highlight pertinent issues and complaints investigated by the Office of the FAIS Ombud.

Complaint: M v O
In the complaint received by this Office, the complainant stated that her two sons, Bradley Meth, her biological son, and Ndiphelele Diko, her deceased brother’s son, had passed away as a result of a motor vehicle accident during the early hours of 5 January 2019. Both of the deceased were covered in terms of the complainant’s funeral policy, as dependent children, and upon submitting claims in respect of the lives lost, the complainant only received a pay-out for Bradley Meth, her biological son. Subsequent to the funerals being conducted on 18 January 2020, the complainant once again followed up with the respondent as to its failure to pay out the claim in respect of Ndiphelele, and it was at this time that the complainant was asked as to the reason why the surname of the deceased, whom she had insured as a child dependant, had been different. Upon informing the respondent that she had become the deceased’s guardian following the passing of his parents, she was requested to provide the death certificates of both the deceased’s parents as well as an affidavit that the deceased was her adoptive son, to which the complainant duly complied. After no further response was received, the complainant once again followed up with the respondent as to the status of the claim, and was told to once again submit proof that she was indeed the deceased’s guardian to which the complainant once again responded. Unfortunately, this did not result in the matter being finalised, and despite trying to follow-up with the respondent, the complainant was unable to get any reasons for the rejection of the claim except that the respondent was not willing to pay-out the benefits in respect of the deceased. The complainant then approached this Office for assistance.

In the response, the respondent claimed that it was the complainant who did not explain that Ndipheleke was not a biological child. The respondent also confirmed that this type of policy only covers the policyholder's spouse and children. The definition of children being in the policy contract and described as follows: Dependent child means your own, legally adopted or stepchild who is not married at the time of his/her death. In addition, the respondent then claimed that as the deceased had been 23 years old at the time of his passing, he was older than 21 and as he was not a full-time student he did not qualify for cover as a dependent child. When pressed on the issue of the different surnames not being a red flag for the respondent’s representative during the application stage, the respondent responded as follows: “When a customer applies for a policy, the information is given in good faith and we do not question the information provided by the customer. A biological mother may have children who do not have the same father and do not share a surname.

This Office was not satisfied with the response, and highlighted the fact that we had not been provided with any documentation to support the respondent’s claims that the complainant had been advised in respect of the maximum qualifying age of 21 (26 for a full-time student). Neither had there been any contact made by the respondent with the complainant when the deceased turned 21 to highlight the fact that unless proof could be provided that the insured was a full time student, and that he would have had to be covered as an extended family member. Failure to adequately advise the complainant in respect of this material term of the contract at both inception and upon the deceased turning 21, was not only contrary to the provisions of the Code, but had also prevented the complainant from the opportunity to make an informed decision and ensure that the deceased was appropriately insured. In respect of the alleged failure by the complainant to have provided accurate information in respect of the deceased’s status as her child, this Office acknowledged that on occasion, mothers and children, depending on the circumstances, may have different surnames. However, different surnames should alert a representative recommending a policy, to obtain further information in respect of the relationship between the policy owner and life to be assured. The respondent was referred to Section 8(1)(a) of the Code, where an FSP must obtain from the client such information regarding the client's needs and objectives, as is necessary for the provider to provide the client with appropriate advice. This Office was of the view that this was the bare minimum that one would expect from an FSP, a duty that is even encapsulated in the 6-step financial planning process. This office was therefore of the view that this aspect could not simply be put down to the complainant’s alleged failure to act in good faith when she herself was unaware of the limitations of cover and special terms of the policy, material terms that ought to have been disclosed to her in concise detail by the representative in accordance with Section 7(1)(c)(vii) of the Code.

This Office recommended that the respondent reconsider its stance in respect of this matter and that it looks to resolve the complaint with the complainant. Subsequent to this response, the respondent made an offer to pay the claim in the amount of R 35 445.00, an offer that was accepted by the complainant in full and final settlement.

Quick Polls


There are countless articles written about South Africa’s poor retirement outcomes. Which of the following would you single out as the biggest contributor to local savers not accumulating enough to buy an adequate and sustainable pension?


Lack of personal accountability
Poor participation in formal retirement funds
Reluctance to seek financial advice early on
SA’s high unemployment rate
fanews magazine
FAnews April 2022 Get the latest issue of FAnews

This month's headlines

The ethical core of insurance relationships
Debarment… a double whammy
A beginner’s guide to scaling the Tech Mountain
Leadership, climate and cybercrime… SA’s top risks
Unpacking the retirement reform developments
Subscribe now