Death is big business – and ‘big business’ usually comes part and parcel with some degree of rot beneath the surface. However, the past few years have revealed a particularly dark side to South Africa’s ‘death sector’, with exploitation and fraud increasingly rife across the local funeral industry.
Among many African societies, death is seen as an especially poignant rite of passage laden with tradition and ritual, where the deceased’s spirit is prepared to pass on to the next realm. The degree of fanfare that accompanies a loved one’s passing is seen as a sign of respect for the deceased, and families that host funerals which do not live up to their community’s expectations often fear losing their social status.
Funerals are perceived to be – and often are – expensive. One research paper which analysed the average cost of funeral arrangements in KwaZulu-Natal revealed that families, on average, spent the equivalent of a year's income on an adult funeral, finding that “households that cannot afford a funeral commensurate with social expectations must borrow money to pay for the funeral.”
Says Liezel Gordon, Client Engagement Team Lead at Metropolitan GetUp, “Given the high costs often associated with burial, funeral policies are the most popular category in the country’s insurance sector.”
The Financial Sector Conduct Authority (FCSA) found that of the 60% of South Africans reported as having at least one insurance product, the vast majority of this group (41%) comprised of those with a funeral policy – bearing in mind that this figure doesn’t account for the informal sector.
Funeral fraud a grave affair
Given its scale, it should come as no surprise that the sector is ripe for exploitation by unscrupulous players. The Association for Savings and Investment South Africa (ASISA), reported that in 2020, 2282 funeral insurance claims were fraudulent or dishonest, accounting for more than 80% of the total number of fraudulent claims in the risk category for that year.
Says Gordon, “Economic upheaval catalysed by the pandemic certainly ramped up society’s collective desperation, which often increases unethical behaviour and crime.”
There’s been a renewed emergence of syndicates that are well-versed in insurers’ policies and processes. These syndicates take out funeral insurance on behalf of already deceased people or, tragically, may even resort to taking the lives of those they insured. “Syndicates, particularly in the Eastern Cape, look for every opportunity to exploit and there has been upward trend with unnatural deaths in the last few years,” noted ASISA. There have also been cases where syndicates have purchased corpses from mortuaries, using the body to claim against policies fraudulently taken out.
“Fraudsters phish personal information from their victims, and then use that data to take out a policy or to include on a fake death certificate,” warns Gordon.
So how can consumers protect themselves? When it comes to suspected fraud, Gordon advises contacting your insurer immediately if you suspect fraud or find that a policy has been taken out in your name, to ensure that any attempt at fraud is stopped in its tracks. “Interrogate your bank statement and be on the lookout for transactions or debits you did not authorise. All fraudulent activity – whether suspected or confirmed – should always be reported to your bank, the insurer in question, and the authorities.”
Insurers dying to sell more
On the other side of the cemetery, there are a rising number of insurers and intermediaries that are far from innocent bystanders in the funeral feeding frenzy. Insurance sales agents, eager to earn commission, may be tempted to ‘over-sell’ bells-and-whistle benefits or advise clients to take out multiple policies with little difference between products. This is generally not in the clients’ best interests, says Gordon.
“Clients are often unable to afford these expensive practices monthly and, in the end, their policies may lapse. If tragedy strikes and the policy has lapsed, the client has nothing to show for it.”
When it comes to taking out cover, Gordon suggests shopping around for a financial product that gives you exactly what you are looking for. “The bells-and-whistles add up in cost, and depending on what you’re looking for, may not always be necessary,” she adds.
A clever approach is to consider what you believe a dignified burial to involve and work out a rough cost estimate. There are funeral planners available to help you with this. Once you know what you need, get a quote from a few providers, and go with the one that you can afford, and which offers you the best value. “You can always add to your policy at a later stage but if you cannot afford the monthly premiums, you will not benefit, reminds Gordon.
“If you already have funeral cover in place, make sure that you are not over-insured. You can often save money by consolidating multiple policies into one plan, which offers all the cover you need for you and your family.”
Funeral industry letting us down
“We’re also seeing some funeral directors overcharging for services or taking advantage of grieving and emotional clients by encouraging them to spend on luxuries they can ill afford,” highlights Gordon.
South Africa’s funeral services industry is still largely unregulated yet growing at a rate of around 12% annually, and it’s projected that its revenue will amount to approximately $272.6 million by 2023. This rapid ‘mushrooming’ has pathed the way for opportunists.
A loved one’s passing is an emotional time and emotions can influence spending behaviour, says Gordon. “If you find yourself struggling to make decisions because you’re grieving, rather than be led to spending on an elaborate casket or expensive service, ask a trusted, financially-savvy friend or family member to assist you,” she advises.
BUSINESS REPORT