Category Life Insurance

Funeral cover and cash

29 August 2006 Angelo Coppola

David Pietersen of the Private Funeral Directors Association speaks to Angelo Coppola about some of the issues facing the funeral sector.

FACT: With the introduction of the FAIS Act in 2004, it encompassed (but was not restricted to) all people engaged in the insurance industry, from motor dealers, attorneys, to estate agents and furniture removers, and last but not least, all businesses associated with the funeral industry.

According to Pietersen, the R65bn funeral industry and funeral insurance has been around for decades and until the introduction of FAIS was the most unsophisticated of the insurance products, simply because it is the only form of cover provided, where premiums (and sometimes claims) are paid in cash.

The opportunities for nefarious activity were legend and FAIS couldn't have been more needed. The problem it seems is that the FSB have very few undertakers, funeral directors, friendly societies and funeral businesses in general, involved in providing such cover, as registered in terms of the FAIS Act.

Pietersen maintains that more emphasis must be placed on the definition of "Fit and Proper" and ensuring that people are trustworthy enough to take cash from the public, in general, and see to it that these premiums land up in the bank accounts of the many funeral insurers.

It appears that the definition of a Financial Service Provider (FSP verses a Representative) is where the problem is, and although the definition is very clear, many people have opted for the latter registration (representative) to avoid the 'headaches' of the registering as an FSP. And just in case they needed more incentive, it's also cheaper to register as a representative.

Pietersen wonders which part of the definition is unclear?

If you are receiving funds from the public, intended to be paid to an insurer, then you fall squarely in the definition of an FSP. A representative falls completely outside of this category. It appears that people are operating illegally as representatives, and in some instances with the consent of certain organizations.

The FSB has their work cut out for them, but Pietersen wonders why those operating in the funeral sector have to attain the high qualification hurdles of FAIS when all they are doing is visiting people and collecting cash.

He isn't disputing that the 120 points are needed for people offering advice in the complex environment of investments and other forms of short and long term cover, but he maintains that these qualifications are over the top when it comes to funeral cover.

At the moment business in this is sector is still conducted as it was in the 'old Prudential' where collectors called on policyholders every month and premiums were and are handed over in cash.

What is needed is certainty that the cash lands up in the right place.

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