Insurance companies have detected 38 cases where individuals were allegedly killed to obtain insurance payouts in 2024. This is almost three times more than what was identified the previous year, which has triggered demands for the introduction of stricter regulations for policies taken out on another person's life.
According to data from the South African Savings and Investment Association, cited by the National Financial Ombudsman Scheme (NFO), the number of such cases increased from 14 in 2023 to 38 in 2024. Although these cases constitute only a small fraction of the total number of murders in South Africa, they occur against a backdrop of persistently high levels of violent crime.
The latest police statistics show that between April and June of this year, 5,427 people were killed, which is 5.9% fewer than the 5,770 people during the same three-month period last year. This equates to approximately 60 murders daily.
National Police Chief, Lieutenant General Puleng Dimpane, stated at the end of last month that '5,427 murders in 90 days is still too many. Every death means a lost life and a devastated family.'
Be vigilant
The NFO is now insisting that the Financial Sector Conduct Authority consider making it mandatory for insurers to obtain confirmation of informed consent from an individual before anyone else can take out a funeral policy on their life. This, according to the NFO, would ensure that people are aware of having insurance on their lives, who took out the policy, and what coverage amount was purchased.
Denise Gabriels, lead ombudsman for the Life Insurance Division of the NFO, noted that industry practices are not uniform. She emphasized that 'a mandatory consent requirement will increase transparency, strengthen consumer protection, reduce opportunities for fraud and abuse, and help insurers verify the legality of policies at the time of conclusion.'
This proposal comes after more than ten years of reports regarding cases where individuals allegedly organized or participated in the death of insured persons to receive insurance payouts. South African law prohibits a person who intentionally kills another from benefiting through inheritance or insurance payments.
Uncertainty
However, the NFO clarifies that the accusation of the beneficiary's involvement in the insured's death does not prove guilt. This puts insurers in a position regarding how to handle a claim while the police investigate the beneficiary's case.
The NFO will generally not rule in favor of a beneficiary who has not been acquitted during a police investigation or criminal case. The beneficiary may approach the ombudsman after the case is concluded, including a court ruling, withdrawal of charges, or a decision by the National Prosecuting Authority not to prosecute.
However, the NFO warns that criminal investigations can take years, potentially denying innocent beneficiaries access to insurance funds. Gabriels stated: 'It would be unfair if insurers and beneficiaries remained in a state of uncertainty indefinitely, waiting for the results of a criminal investigation that shows little progress.'
In cases of undue delay, the NFO may require the insurer to make a decision on the claim using available evidence and policy terms. Gabriels added: 'This approach recognizes that while government policy requires vigilance regarding fraudulent and illegal claims, unlimited delays can also undermine the rights of innocent policyholders and beneficiaries.'