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More than half of funeral cover claims are declined because clients don’t meet policy Ts&Cs, according to the latest NFO Annual Report. But it doesn’t have to be this way. Kobus Wentzel, Group Distribution Executive at 1Life Insurance and Clientèle, believes a simple conversation can help clients get their claims paid, and boost trust in the industry.
Valid funeral cover claims start with policy Ts&Cs
Insurers decline claims when clients don’t fully disclose information, for example by omitting details of their state of health or occupation, as well as when Ts&Cs are not met. Long-term insurance contracts are mutual agreements between clients and insurers, and when the client does not meet the terms of the agreement, the company doesn’t have to fulfil its obligation to pay a claim. In many cases, the Ombud upholds these decisions. Only 25% of long-term insurance complaints finalised in 2024 were upheld in favour of the complainant.
Any insurance claim that is declined is devastating for families. Although we tend to focus on non-disclosure as a reason for claims not being paid, it is clear from the latest NFO report that not meeting policy Ts&Cs is also a problem.
We can improve these stats and outcomes for our clients by making sure they understand the Ts&Cs of their policies. While they will be familiar to advisers, many of their clients still struggle to understand them and appreciate how important they are. This is especially true for vulnerable clients, such as the elderly, or those who have suffered a recent trauma such as death or divorce.
Top 3 Ts&Cs the NFO receives complaints about
Qualifying policy definitions
These are the must-meet criteria all policies have. They include basics like paying premiums when due, but of particular importance in funeral cover is member definitions.
Your clients need to know who qualifies as a member and additional member. Make sure your clients understand the definitions of extended family members who must be blood relatives or related by marriage, and not casual “cousins.” Children need to meet the age and/or student- dependency criteria, with many policies allowing children over the age of 21 to be covered only if they are studying full time and financially dependent on parents. Older extended family members may also need to qualify based on age at entry, so always check this with your product provider and broker consultant so your clients don’t pay for members for whom claims will not be paid.
Insurable interest
The main member must have a close and loving, and/or financial relationship, such as dependency, with all additional members covered on the policy. Without these, there is no insurable interest which means declined claims. Clients need to know that distant relatives they never see, or casual acquaintances, cannot be covered on a policy because there is no insurable interest.
Waiting periods
These remain a challenge for many clients. The most important points to share with clients are:
- Premiums have to be paid during waiting periods
- The waiting period may end when a time period is up, in addition to all required premiums being received by the insurance company
- Waiting periods apply to all new covers – for new members when added and for increases in sums assured
- Waiting periods may apply to specific causes of death only, such as natural causes – check that your clients understand the difference between death due to natural and death due to accidental causes
Use your broker consultant’s knowledge
Product providers give comprehensive training on their policies and updates so be sure to attend them. Your broker consultant is an excellent resource and may have examples to share of claims that were declined – and why.
Time spent explaining Ts&Cs builds confidence in the industry
When too many claims are declined, and clients don’t get the resolution they expect, consumers’ confidence in the industry falls. South African life insurers have excellent claims-paying records, with over 95% of claims paid, and paid quickly. But each individual client needs to know that their claim will be paid when the time comes. For this to happen, we need to help clients understand Ts&Cs so their claims are valid and loved ones have the funds they need. A few minutes spent explaining policies will reduce declined claims and boost confidence – which is always good for business!