The Financial Sector Conduct Authority (FSCA) has urged clients of financial institutions – who were outraged by the Old Mutual saga – not to cancel their funeral policies as there are risks involved.
“As the conduct authority for the financial sector, we exist to ensure that customers are treated fairly by financial institutions. While we do not resolve individual complaints, we do hold accountable any licenced entity that does not treat its customers fairly.
“We have also noted a call on social media for the cancellation of Old Mutual policies. Although we understand the frustration felt by many, we urge customers not to cancel their policies as there are risks involved with such an action,” the FSCA said in a statement on Thursday.
These risks include:
- A customer who cancels their life policy may find it difficult if not impossible to find new cover if they had developed medical conditions along the course of their policy.
- A life policy taken out when you are younger is usually a lot cheaper than a policy taken out when you are older and a new policy taken out by an older person may not just have higher premiums but it may be difficult to get the same cover and limits they had before.
- Early termination of an investment policy could attract charges, and these could also be payable on entering an alternative investment. There may be waiting periods attached to the new funeral cover a client receives.
The FSCA statement comes after growing calls to cancel funeral policies with Old Mutual after a family in KwaZulu-Natal was forced to take the body of their relative to an Old Mutual branch in order to prove that he was indeed dead.
“It is our understanding at this stage that the family resorted to the desperate action of bringing the body of their deceased loved one to an Old Mutual branch in order to have their benefits paid out to them.
“We are interrogating the facts in this matter, and once we have concluded our assessment, we will take appropriate action where necessary,” the conduct authority explained.
In addition, the FSCA said it existed to ensure customers were treated fairly by financial institutions.
“While we do not resolve individual complaints, we do hold accountable any licenced entity that does not treat its customers fairly.”
It added should a customer wish to cancel their policies, they first had to obtain a detailed comparison of the features and costs of the old and new policies with the help of a qualified financial adviser.
Old Mutual has since apologised for the delay in paying out the funeral claim to Sifiso Mtshali’s family.
It stated the claim, which was lodged on November 11, was not delayed due to any doubts, but because “it was referred for further individual assessment”.