Metropolitan under fire over dubious agreement

Ombud rules in favour of client after benefit is withheld

The FAIS Act stipulates how financial services providers need to conduct their business. Picture: Thinkstock
The FAIS Act stipulates how financial services providers need to conduct their business. Picture: Thinkstock

Metropolitan has come under fire as the insurer behind a burial society that failed to pay a member’s relative her benefit.

The Ombud for Financial Services Providers has ruled in favour of a Free State woman and ordered Buys Burial Society and its owner Jerome Buys to pay Martha Maarman R13,462 with interest.

Ombud Naresh Tulsie also referred Buys Burial Society to the financial services regulator – the Financial Sector Conduct Authority – for further investigation, saying it appears Buys does not fall within the Financial Advisory and Intermediary Services (FAIS) Act’s definition of a burial society and is a burial society in name only.

According to the ombud’s ruling, Buys Burial Society operates the Peace of Mind group scheme funeral policy from Boshof in the Free State. The scheme is underwritten by Metropolitan.

The ombud’s office could find no evidence that Buys had ever been licensed as a financial services provider in terms of the FAIS Act or that a valid underwriting agreement existed to ensure the solvency of the fund.

The ombud also found no evidence that Buys was registered in terms of the Long Term Insurance Act. The office asked Metropolitan whether the burial society held a licence, and if not, why underwriting was provided to an unregulated entity. In response, Metropolitan told the ombud that the FAIS Act exempts burial societies and stokvels from registering as financial services providers.

Metropolitan confirmed that it had a contract with the burial society to pay valid claims to the society. But Tulsie says he found the arrangement between Metropolitan and Buys “questionable”, as members of the scheme enjoyed no protection.

“Money claimed by the burial society is paid to them directly, without any consideration by Metropolitan as to whether the claimants receive the benefits they are entitled to,” the ombud says in the ruling. Maarman did not receive the benefit she was entitled to.

According to the ruling, in August 2016, when Metropolitan received Maarman’s claim from the burial society, it duly paid an amount of R13,462 – which was the R15,000 benefit less arrears premiums – to Buys and advised him to pay the money to Maarman.

Buys, however, maintained that he would only pay Maarman on receipt of proof that she had paid the premiums. He was thus unduly enriched, the ombud says.

Tulsie found that Buys and his burial society were in contravention of the FAIS Act which says that: “A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.”

He subsequently upheld Maarman’s complaint and held the burial society and Buys jointly and severally liable to pay the R13,462 to her.

The ombud also ruled in favour of a pensioner who took out a policy with Khayelitsha-based Eyodidi Funeral Undertakers after he failed to receive a R3,000 benefit due to him after his granddaughter passed away.

The pensioner, Mlamuli Sidinana, had supplied the death notice, the birth and death certificates and the burial order as required, but Eyodidi then demanded that the funeral parlour confirm it was in possession of the body and refused to pay the benefit claiming the documentation was incomplete.