Switching funeral policy providers made easier

New law to address risk of waiting periods and double premiums

12 March 2020 - 10:11
By angelique ardé
Switching funeral insurers is risky when it triggers a new waiting period, during which time you have no
cover. This is set to change. Picture: 123RF/DOLGACHOV
Switching funeral insurers is risky when it triggers a new waiting period, during which time you have no cover. This is set to change. Picture: 123RF/DOLGACHOV

There is much competition among funeral policy providers and it may make sense to switch to a new policy. But switching funeral insurers is risky when it triggers a new waiting period, during which time you have no cover.  

This is set to change, however, when a new law governing funeral policies comes into effect. 

Ahead of the change, two large banks Capitec and FNB, are waiving waiting periods when cover is moved to their policies.

All funeral insurance providers are being issued with new licences under an amended Insurance Act. 

When they begin operating under their new licences, they will no longer be allowed to apply a waiting period to your cover when you have moved it from another provider, Lee Bromfield, the chief executive of FNB Life, says. 

The new law will also set the waiting period for benefits after a death from natural causes at six months, unlike as is currently the case where the waiting period can be as long as 13 months, he says.  

To avoid being denied benefits during a waiting period, some consumers do not switch policies and others pay premiums on two policies until the waiting period has expired. 

Bromfield says the financial services regulator, the Financial Sector Conduct Authority, is in the process of relicensing insurers and the implementation date for the amended act has not yet been set.

However, in anticipation of the new requirement, FNB Life has announced that it will now waive waiting periods when you take a policy with it, if you have already “completed” a waiting period on an existing funeral policy. In other words, if you have a policy that is beyond the waiting period, you can switch to FNB’s funeral policy without being subject to a new waiting period. 

To protect themselves during the transition from one insurer to another, policyholders have had to carry the financial burden of paying premiums to both insurers until they had completed the new insurer’s waiting period.

Claims rejected when someone who is covered by a policy dies during a waiting period is one of the leading causes of complaints to the office of the Ombudsman for Long-term Insurance.

Capitec has never applied a waiting period when policyholders switch from another registered insurer to Capitec at the same level of cover, the bank’s head of marketing and communications, Francois Viviers, says. 

The waiving of a waiting period when switching and other changes to the law governing funeral cover will protect you from exploitation and unfair treatment, Bromfield says.

Other changes that will come in when the amended law takes effect that will benefit you are:

  • The funeral insurance industry is now regulated, and even micro-insurers have to be licensed, thus protecting customers from fly-by-night unlicensed companies that cannot be held accountable for services.
  • Once you’ve submitted to your insurer all the required documentation when making a claim, your insurer will have 48 hours to decide on the claim. This is to protect you from unnecessary delays in the payment of claims. Some providers are paying valid claims within 30 minutes.
  • It will be easier for you to compare the policies offered by the various providers as they will no longer be allowed to offer additional benefits like food vouchers and transport to the funeral.

 “We’ve never competed in the value adds; our strongest selling point is price. If you take up the policy on our app, you can save yourself almost half of your premium, depending on the total value of the policy and the number of lives,” Viviers says. 

  •  Funeral insurers will only be allowed to sell you cover of up to R100,000 per life covered.

“The limitation is on the maximum cover per life and not on the number of lives insured,” Viviers says. A distinguishing feature of Capitec’s policy is that you can cover up to 21 lives on a single policy.

Both Capitec and FNB have added features to their policies to attract your business.

The Capitec policy, for example, comes with a voluntary policy pause feature, allowing you to pause the cover and payments for up to six months. After that you can reactivate the policy without being subject to any waiting period or repricing of your premium.

On FNB’s funeral plan, there is an optional escalation, Bromfield says. This ensures that your benefit and premium increase at the same rate. “Most insurers impose a compulsory increase on the premium, at a higher rate than the benefit or increase the premium only and not the benefit,” he says.

Bromfield says FNB is the only funeral insurance provider in South Africa that proactively looks for beneficiaries to pay claims, even if they didn’t know a plan existed and hadn’t claimed. “Last year alone we traced and paid over R50 million to beneficiaries who didn’t know they could claim.”