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BACKGROUND

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BACKGROUND

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  1. INTRODUCTION“It is unwise to pay too much, but it’s worse to pay too little. When you pay too much you lose a little money - that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it cannot be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that you will have enough to pay for something better.”John Ruskin

  2. BACKGROUND • Origins of the assistance policy • Characteristics of the assistance policy • Low premiums • Low sums assured • Cash premium collections • Limited medical underwriting • Voluntary Group Schemes

  3. NATURE OF THE CONTRACT OF INSURANCE A contract of insurance must contain the following essential terms – • a term that the premium will be paid or a term making the contract dependant on the premium being paid by the insured • a term that the insurer will compensate the insured for either a patrimonial or non-patrimonial loss by payment of a benefit [sum of money or equivalent] by the insurer • a term that the insurer’s obligation is dependant on the occurrence of uncertain event • an insurable interest on the part of the insured

  4. REGULATORY ENVIRONMENT • Registration and Authorisation • Deemed Insurers • Obtaining Information – • Long-Term Insurance Act • Inspection of Financial Institutions Act • Financial Institutions (Protection of Funds) Act • FAIS • FIC • Permissible actions for contravention of the Long-Term Insurance Act

  5. MARKET PARTICIPANTS • Underwriters • Administrators • Intermediaries and Representatives • Consumers • Undertakers

  6. MARKET PROBLEMS • Benefits not available in cash • Beneficiary nominations lacking • The Extent of Underwriting - • Over insurance • Double insurance • Under insurance • Part insurance • Premiums • Nature and Extent of Cover • Lack of Insurable Interest • Policyholder contact details

  7. MARKET PROBLEMS (continued) • Continued Premium Payments • Lack of Consistency in Documentation • The Pre-paid Funeral • Replacement Policies • Commission Regulation • Income Tax and Vat Issues

  8. CONSUMER EDUCATION • Basis • FSB Act • Responsible parties • LOA • FSB • Problems • Literacy • Perception • Medium • Understanding of the market by the FSB / LOA

  9. WHY IS THIS RELEVANT? • Death is inevitable • Funeral expenses inevitable / increasing • Payment • Policy / Fund • Loan / Credit • Family collection • No money, no funeral - Will the State pay? • Pauper funerals

  10. RISKS • Increasing mortality • Failure of registered insurers • Cessation of business by unregistered insurers • Continuing increase in funeral expenses • Financial soundness / solvency of unregistered insurers • Increased state contributions for funeral expenses?

  11. SUGGESTIONS • FSB must visibly enforce what it has • Re-focus consumer education • Focus initially on civil not criminal remedies • Dedicate / budget appropriate resources • Training of FSB inspectors and staff • Conduct inspections • Consider • Premium Setting • Standard contract terms • Involve Metropolitan Councils and SARS and Consumer Affairs

  12. CONCLUSION Quote: “A man’s dying is more the survivors affair than his own” Thomas Mann (1875 - 1955)

  13. INTRODUCTION “It is unwise to pay too much, but it’s worse to pay too little. When you pay too much you lose a little money - that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it cannot be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that you will have enough to pay for something better.”John Ruskin

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