A recent ruling by the FAIS Ombud has put funeral homes on notice – offering life insurance policies without proper underwriting won’t go unchallenged.
In a determination issued on 6 December 2024, the Ombud ruled in favour of Pulungoana Moeti, who lodged a complaint against Lebohang Funeral Home (Pty) Ltd after his claim for a R20 000 funeral payout was denied.
Moeti had taken out a funeral policy with Lebohang on 10 December 2018, paying monthly premiums of R200. When his sister, Malebina Mokoena Tjeku Tsosane – the life insured – passed away on 13 November 2022, he filed a claim, only to have it rejected without clear justification.
After exhausting all other avenues, Moeti approached the FAIS Ombud in January 2023 to intervene.
On 18 June 2024, a recommendation under section 27(5)(c) of the FAIS Act was sent, advising the funeral home to settle the R20 000 claim.
On 27 June 2024, Lebohang responded, agreeing to pay the claim – but in instalments of R1 000 a month. The FAIS Office urged Lebohang to either pay the full amount or propose a more reasonable lump sum that Moeti could consider.
Lebohang failed to make any payment, leaving the claim unresolved.
Notably, Lebohang Funeral Home’s financial services provider licence was suspended on 31 July 2024. However, the Ombud affirmed that since the complaint was lodged while the provider was still licensed, the office retained full jurisdiction over the matter.
Policyholders left without cover
The funeral home’s failure to pay underwriting premiums left policyholders exposed – without coverage and with false assurances of protection.
On 16 August 2022, facing historical non-compliance flagged by the Financial Sector Conduct Authority, the funeral home sought underwriting support from Gavanni Group Scheme. That same day, Gavanni invoiced Lebohang for R102 477.50, representing funeral insurance premiums collected from its members. However, the payment was never made, meaning the policies were never incepted – neither with Gavanni nor its underlying insurer, Rand Mutual Assurance.
To rectify the situation, Lebohang signed an acknowledgment of debt (AOD) on 2 September 2022, committing to settle the outstanding premiums by 15 September 2022. Yet, it failed to meet the agreed terms, and the invoice remained unpaid. Without the first premium, no risk cover was assumed, leaving policyholders uninsured between August and November 2022.
Despite this, Lebohang continued to mislead clients, falsely claiming that Gavanni was withholding claims. In reality, Gavanni only assumed risk from 1 December 2022 – after receiving its first premium payment on 12 December 2022. Even then, natural deaths were subject to a six-month waiting period, and no further premiums were received to sustain coverage.
With no payments received, Gavanni terminated its relationship with Lebohang on 17 February 2023.
Excuses, excuses
The funeral home insisted that its cover with Gavanni began in September 2022 and that no waiting period applied, citing a valid claim ratio from its previous underwriter, Safrican.
According to Lebohang, it made a payment to Gavanni in December 2022 and maintained regular communication about delays. The funeral home claimed that Gavanni had assured them that if outstanding premiums were settled, the October and November 2022 claims would be reconsidered, while the December 2022 and January 2023 claims would be paid.
Lebohang further stated that on 13 January 2023, its representatives met with Gavanni in person, where they were allegedly promised that payouts would be processed the following week. Acting on this assurance, Lebohang informed clients that their claims would be settled between 16 and 20 January. However, no payments materialised.
However, Lebohang could not provide any documentary proof of payments made or any written confirmation of Gavanni’s commitments – leaving its claims unsubstantiated.
Lebohang liable for unpaid funeral claim
In reviewing the evidence, the FAIS Ombud, Advocate John Simpson, found no clear proof that Gavanni underwrote Pulungoana Moeti’s policy at the time of the insured’s passing in November 2022.
“Lebohang appears to have unlawfully issued policies and accepted premiums without being underwritten. It is solely responsible and liable for paying the claim submitted by the complainant,” Simpson ruled.
Since Moeti had consistently paid premiums to Lebohang, the Ombud determined he was entitled to the claim payout. “Lebohang’s dispute with Gavanni regarding the payment of premiums and the agreement reached does not constitute a valid defence,” the ruling stated.
With the complaint upheld, Lebohang was ordered to pay Moeti R20,000, plus interest at 11.75% a year from the date of the determination until full payment. The funeral home did not apply for reconsideration with the Financial Services Tribunal, meaning the decision stands.
The determination will now be made an order of court, allowing Moeti to enforce payment through legal channels.
Read the full determination here.
