The Life Division of the National Financial Ombud Scheme (NFO) in South Africa has expressed concern over the increasing number of cases where beneficiaries are accused of orchestrating the deaths of policyholders to claim life insurance payouts. According to Denise Gabriels, Lead Ombud of the Life Insurance Division of the NFO, the organization has taken a firm stance on investigating complaints. If a criminal case is opened against a beneficiary, the NFO will not investigate their complaint while police investigations or court proceedings are ongoing.
The NFO's approach aims to balance public policy and fairness in resolving life insurance disputes. Gabriels emphasized that justice delayed must not become justice denied, and where investigations drag on unreasonably, insurers may need to assess claims on their merits. The Association for Savings and Investment South Africa (ASISA) reported 38 murder-for-money cases in 2024, up from 14 cases in 2023. South African law recognizes the principle that no person should benefit from their own unlawful conduct.
The NFO is committed to ensuring that all parties are treated fairly and that complaints are resolved in a manner consistent with the law, public policy, and natural justice. When a beneficiary is suspected of being involved in the death of the policyholder, the NFO will generally refrain from making a ruling in their favor while the matter remains under investigation. The beneficiary can return to the NFO once the criminal matter has been finalized.
The NFO is mindful of the lengthy delays in finalizing criminal matters and the impact on insurers and beneficiaries. Gabriels stated that where there has been an unreasonable delay, the NFO may require the insurer to assess the claim on its merits based on available evidence and policy terms. This approach recognizes the need for vigilance against fraudulent claims while protecting the rights of innocent policyholders and beneficiaries.
For over a decade, South Africans have been exposed to media reports of individuals allegedly arranging or participating in the deaths of insured persons to obtain insurance proceeds. The NFO believes that one of the most effective safeguards to reduce opportunities for abuse is a requirement for insurers to obtain the informed consent of the life assured whenever cover is taken out on their life by another person.
A mandatory consent requirement would enhance transparency, strengthen consumer protection, reduce opportunities for fraud and abuse, and assist insurers in verifying the legitimacy of policies at inception. The NFO believes that a consistent regulatory framework would improve standards across the industry and promote better outcomes for consumers. The Financial Sector Conduct Authority (FSCA) is urged to consider introducing conduct standards or regulatory requirements mandating proof of informed consent.
The NFO's proposals aim to address the vulnerabilities in the life insurance sector and prevent murder-for-payout rackets. By implementing stronger consumer protection measures, the industry can ensure that individuals are aware of insurance cover on their lives and understand who has taken out the policy. This would promote a fair and transparent insurance sector, protecting the rights of policyholders and beneficiaries.
Key points
- The NFO is urging the industry to require insurers to secure proof of the life assured's informed consent before issuing funeral policies.
- The Association for Savings and Investment South Africa (ASISA) reported 38 murder-for-money cases in 2024, up from 14 cases in 2023.
- The NFO will not investigate a complaint while police investigations or court proceedings are ongoing if a criminal case is opened against a beneficiary.
