Fraudulent Funeral Policies

Funerals play a very important role in many cultures in South Africa, and they can cost a lot of money. Funeral policies, therefore, play a crucial role at a time when one does not want to worry about the financial burdens that come with a funeral, as a funeral policy will pay out a lump sum when a life assured passes away so that they can be buried with dignity.

The nature of funeral policies, where the providers of these policies, for example, do not conduct medical underwriting as with more traditional life cover policies, does, however, create an environment that is prone to fraudulent transactions. The perpetrators of these fraudulent policies employ several scams to lure unsuspecting consumers, as described in the scenario detailed below:

  • An unsuspecting client is requested to complete an application for a food voucher, or to enter a competition, or simply to obtain a no-obligation quotation.
  • Assurances are provided that no policy will be issued without the client first receiving a phone call from the product provider to confirm the application.
  • The encounter usually takes place at a mall or any other public location.
  • The individual is caught off guard and asked to provide personal information, which is then used to complete the application form.
  • In addition, the unsuspecting client is told to verify an SMS that is sent to their mobile phone, to verify their account details.
  • By doing so, the individual completes a DebiCheck process that allows a debit order to be put in place to collect premiums for a policy they have no knowledge of.
  • The insured person of the fraudulent policy is normally the unsuspecting client, while the beneficiary or beneficiaries are unknown to that individual.
  • Importantly, the targeted individuals are mostly unemployed, lay persons who are unable to comprehend the seriousness of the encounter and the subsequent SMS link which is sent to authorize the debit order.
  • The policy is mostly active for a few months before the person becomes aware and cancels the policy requesting a refund without success.
  • The client is then told that an application form was completed, and that authority had been provided to debit the bank account. Therefore, there is no valid basis for the fraudulent claims or for a refund of the deducted premiums.

Another scenario involves these fraudsters gaining access to the Persal systems, especially in relation to government employees such as teachers, nurses, soldiers, etc. Policies are provided without the knowledge and consent of the individual, and deductions are made directly from the individual’s salary slip, only to be discovered months or sometimes years later.


The complainant was unhappy with a funeral policy which was issued without his authorization. The complainant claimed that the agent who took his details informed him that it was just a quote, and the policy would only be issued after he received a call from the product provider, confirming that they had received his details for a funeral policy. The complainant states that according to the agreement with the agent, the respondent was merely preparing a quote and he was surprised when three months later, he discovered that the respondent had been debiting his account with an amount of R270. The complainant states that he had reported the matter to the agent who reassured him once again that the product provider was supposed to call him before any policy was issued. The complainant states that he cannot afford the funeral policy and requires a refund of all premiums deducted without his consent.

In response to the initial correspondence sent by this Office, the respondent claimed that the policy was facilitated by means of an application form, and that the application form contains all the relevant information required to take out the policy. The respondent claimed that it had, in good faith, captured the details on the application form and activated the policy.

The respondent was of the view that the application form, appears to confirm that the client had agreed to taking out the policy, and that by signing it he had not only agreed to it, but also confirmed that he had understood and accepted the terms and conditions of the policy.

The respondent pointed to the following section of the application form which states: “My signature(s) below confirms my understanding and acceptance of the following as they appear in the Product Booklet and on this application form. 1. Debit Order Authorisation 2. Personal Information Authorisation 3. General Declaration 4. Statutory Notice 5. Compliance Checklist. …and agree to proceed with my application on this basis.”

The respondent also submitted that the complainant was sent a message by his bank to validate the debit order, which contained the details of the policy and the premium to be deducted. By agreeing to the debit order, the complainant had indicated his willingness to take out the policy and have monthly premiums debited against his account bank account. Additionally, the respondent confirmed that the complainant had been sent a copy of the policy documents.

Therefore, based on all these aspects, the respondent was confident that it would be implausible to argue that the client had no knowledge of or did not consent to the policy.

In response, this Office informed the respondent that we have noticed with concern a surge in complaints against the respondent where the Modis Operandi was similar or the same. Additionally, this Office argued that despite the existence of an application signed by the complainant, and the approval of a debit order authorization sent via SMS link, concerns about the respondent’s conduct in this matter persisted. It was disconcerting that an individual would apply for a policy, cancel it shortly after a month, request a refund, and then claim to have never authorized the policy – especially if they indeed applied for the policy as a product that suited their needs and circumstances.

This Office confirmed that it had noted the new modus operandi and the similar nature of complaints received regarding similar unauthorized policies. This is contrary to Section 2 of the General Code of Conduct for Authorized Financial Services Providers and Representatives, which requires that Financial Services Providers render financial services honestly, fairly, with due skill and care and diligence, and in the best interest of the client.

This Office therefore recommended that matters of this nature be reconsidered by the respondent, and that it should consider refunding all premiums deducted from the inception of the policy. In response to the recommendation made by this Office, the respondent remained adamant that the complainant had signed the application form, provided authentication via the bank message (DebiCheck), and was sent a copy of the policy documents making it implausible that he was not aware of or had not consented to the policy.

However, despite this, the respondent agreed to refund the premiums paid on a goodwill basis. The refunded premiums were provided to the complainant as a full and final settlement.

It must be noted that the respondent has been reported to the Financial Services Conduct Authority to investigate the conduct of the respondent and its representatives in view of the significant number of complaints where the Modis Operandi was eerily similar, and where despite this Office having brought this to the attention of the respondent the practice continued unabated.

Lessons Learnt:

1.) Be cautious of individuals who approach you in malls or other public settings, making grand promises of competitions, offering vouchers, or providing quotations for products like funeral policies or other financial products.

2.) To enter a competition, one should not have to provide your identity number, or any other personal information. Likewise, one does not need to provide an identity number or banking details for someone to generate a quotation in respect of a funeral policy or any financial product.

3.) Of utmost importance is not to acknowledge any SMS that is sent to you under the pretences of confirming the authenticity of your banking details. Not only are banking details not required in such circumstances, but by acknowledging such an SMS you are, in fact providing the service with authority to deduct premiums from your account.

4.) Also be very aware of any document that you are asked to sign. Make sure that you are 100% certain as to the reason for you having to sign any documentation, and what the nature of the document is, as well as the implications of you signing it. Should you have any reservations whatsoever, do not sign the document.

5.) Make it a habit to regularly check your salary slip as well as your bank statements to identify any deductions that you are not aware of. The earlier you identify any fraudulent deductions being made from your bank account or salary the quicker you can address the situation and limit any potential financial prejudice.

Good day,

Kindly note that I am on leave with no access to my email and will return to the office on 11 September 2023.

Kind Regards