Failing to inform policyholders of premium increases can have costly consequences for burial societies – as Luvuyo Burial and Consulting has learned.
The FAIS Ombud ruled against Luvuyo Burial after the funeral scheme failed to properly notify a policyholder of a premium increase, resulting in a rejected claim. The determination, issued on 22 January, found in favour of Xolisa Matoti, who had been denied a R10 000 payout following the death of one of the insured lives on his policy.
Matoti took out the funeral policy in October 2020, paying a monthly premium of R200. However, when he submitted a claim in October 2023, Luvuyo informed him that his premium had increased to R400 from April 2022 – information he said he never received. Luvuyo argued that it had sent out notifications via SMS in February 2022, but was unable to provide proof that Matoti had been informed.
After struggling to obtain a response from Luvuyo for months, Matoti escalated the matter to the FAIS Ombud. The Ombud’s investigation found that Luvuyo had failed to comply with the Policyholder Protection Rules (PPR).
In terms of Rule 15(6): “An insurer must timeously and in writing inform a policyholder of a pending review and the timing of the review if the review is expected to result in a premium increase.”
Rule 15(7) states: “If a premium payable under a risk policy will be increased as a result of a review, an insurer must take reasonable steps to afford a policyholder alternatives (such as the option to terminate the policy, to reduce the policy benefit or to enter into an alternative policy) to mitigate the impact of the increase on the policyholder.”
In October 2024, the Ombud’s Office recommended that Luvuyo settle the claim. The company initially offered to pay only R5 000 – half the benefit amount – arguing that Matoti had not paid the increased premiums. The Ombud rejected this and ruled that the full R10 000 should be paid.
Although Luvuyo eventually made an initial payment of R5 000, it delayed settling the balance until a formal determination was issued. The outstanding R5 000 was finally paid after the Ombud’s order.
The case also raised concerns about Luvuyo’s regulatory compliance. When Matoti’s policy was issued in 2020, it was underwritten by Sanlam Developing Markets Limited. However, Sanlam terminated its involvement in May 2021. Luvuyo later admitted to the Ombud’s Office that it currently has no underwriter, raising questions about the legitimacy of its operations.
A copy of the determination has been referred to the Financial Sector Conduct Authority for further investigation and potential enforcement action.
Read the full determination here.
