INSETA welcomes FAIS exemption for burial societies

The Insurance Sector Education and Training Authority (INSETA) welcomed Government’s recent decision to exempt Burial Societies and Stokvels from certain conditions of the Financial Advisory and Intermediary Services Act (FAIS), saying it helped pave the

Being self-regulatory, Burial societies and Stokvels may now render financial services to or on behalf of its members without having to register as authorised financial advisors. Section 7.1 of FAIS Act requires all advisors to be FAIS compliant in order to render financial services to members of the public. This comes in the wake of Government’s declared intention of creating regulatory environments that support the development of the small enterprises sector as a means of developing poorer communities.

INSETA CEO Sandra Dunn said that the massive footprint of the burial society sector within South Africa’s mainly black communities, meant that there was a huge potential to create wealth for poorer households. The exemption from FAIS compliance that up to now threatened the potential closure of Burial Societies is a big step towards this goal, she said.

“The FAIS exemption means that burial societies do not have to fork out huge costs to become FAIS compliant. The focus now needs to be on improved governance of burial societies and professionalisation of the industry. This is being done through formal registration as a co operative. INSETA is assisting Burial Societies to register as co operatives and is offering training and support. ” she said.

Burial Societies have enormous potential to help poorer members of South African society towards economic emancipation. Stokvels have for decades given members direct access to financial resources in times of need, and have great potential to help members create wealth for their families. Some 20% of the South African adult population are members of a Burial Society, with members spending R4,5 billion rand per annum – 15% of their income - on funeral savings.

“The interaction between traditional burial society cover and more formal financial products creates significant opportunities and challenges, which the industry associations are exploring together with other industry partners,” Dunn said.

INSETA was established to promote skills development in the insurance industry – including Burial Societies – and to help brokers become more professional, competent and compliant with FAIS requirements.

The organisation hosted a Burial Society Indaba in Johannesburg which brought burial societies together to discuss ways to organise, expand and improve the sector and its services. The Indaba was welcomed as an opportunity to gain formal recognition for the important role that Burial Societies play in local communities, and served as a platform to help build a more formalised and professional industry.

This sector has raised concerns about the general levels of financial literacy within the Burial Societies, and cautioned that this skills gap would need to be addressed if they were to expand their services and develop into more formalised enterprises.

“Entrepreneurial opportunity exists for Burial Societies to expand their offerings, and to plough back into poorer communities the large amounts of money already being spent on funerals. Even in the current unregulated space, the sector has mass market appeal. We therefore need to develop a working framework that allows the societies and their members to maximise benefits and create wealth,” Dunn said.