BUSINESS NEWS - The growing number of reported cases in which beneficiaries are allegedly accused of arranging the deaths of life policyholders to obtain insurance payouts has prompted the Life Insurance Division of the National Financial Ombud Scheme (NFO) to call for stronger safeguards in the industry.
The NFO says the cases raise difficult questions about how life insurance policies are issued, how suspicious claims should be handled and how innocent beneficiaries can be protected while criminal investigations are underway.
One of the measures proposed by the NFO is for insurers to obtain proof of the life assured’s informed consent before issuing a policy taken out on that person’s life by someone else.
NFO sets out approach to criminal cases
Denise Gabriels, Lead Ombud of the NFO’s Life Insurance Division, said the organisation has adopted a clear approach where a beneficiary is facing criminal allegations relating to the death of the insured person.
Where a criminal case has been opened against a beneficiary, the NFO will generally not investigate or rule on that person’s complaint while a police investigation or criminal court proceedings remain active.
“At the same time, the NFO cautions that justice delayed must not become justice denied,” Gabriels said.
Where an investigation is unreasonably delayed, or SAPS confirms that a beneficiary is no longer regarded as a suspect, insurers may be required to assess a claim on its merits rather than leave families in prolonged uncertainty.
Balancing fairness with public policy
The NFO regularly deals with life insurance disputes where questions arise about the circumstances surrounding an insured person's death or whether a beneficiary may have been involved.
These cases raise an important public-policy principle: a person should not be allowed to benefit financially from his or her own unlawful conduct.
However, the NFO also stresses that an allegation is not proof of wrongdoing.
Its approach is therefore aimed at balancing the need to protect the integrity of the criminal justice system with the rights of policyholders and beneficiaries to have legitimate insurance claims considered fairly.
According to the Association for Savings and Investment South Africa (ASISA), South African life insurers detected 38 murder-for-money cases in 2024, compared with 14 cases identified in 2023.
What happens while a criminal investigation is pending?
If a beneficiary has not been cleared of suspicion concerning the death of the life assured, the NFO will generally refrain from making a ruling in the beneficiary’s favour while the matter is being investigated by SAPS or is before the criminal courts.
The beneficiary may return to the NFO once the criminal matter has been finalised. This could follow a court verdict, the withdrawal of charges, a decision by the National Prosecuting Authority not to prosecute and the issuing of a nolle prosequi certificate, or another final resolution of the criminal matter.
The NFO says this approach helps prevent conflicting outcomes between the criminal justice and complaint-resolution processes.
What if the investigation takes years?
Gabriels said the NFO is also mindful that criminal investigations and prosecutions can take years to conclude, sometimes through no fault of the claimant.
“It would be unjust for insurers and beneficiaries to remain in a state of uncertainty indefinitely while awaiting the outcome of a criminal investigation that shows little progress,” she said.
Where there has been an unreasonable delay, the NFO may require an insurer to assess the claim on its merits using the available evidence and the terms and conditions of the policy.
“This approach recognises that while public policy requires vigilance against fraudulent and unlawful claims, indefinite delays may also undermine the rights of innocent policyholders and beneficiaries,” Gabriels said.
Each matter will still be considered on its individual circumstances, including the available evidence, the status of the criminal investigation and the interests of everyone affected.
NFO calls for informed consent
The NFO believes one way to reduce the opportunity for abuse is to require insurers to obtain the informed consent of the life assured when another person takes out cover on his or her life.
According to the NFO, this would ensure that people know that insurance cover exists on their lives, who has taken it out and the extent of the cover.
“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,” Gabriels said.
She said insurers already have processes aimed at confirming insurable interest and preventing fraud, but practices are not always uniform across the industry.
The NFO therefore believes the Financial Sector Conduct Authority (FSCA), in consultation with relevant stakeholders, should consider introducing conduct standards or regulatory requirements requiring proof of informed consent before a policy is issued on someone's life.
The organisation says such measures could strengthen accountability, improve compliance and support greater public confidence in the life insurance industry.
A warning for the insurance industry
The NFO says media reports over more than a decade have highlighted cases in which people have allegedly arranged or participated in the deaths of insured individuals in order to obtain insurance proceeds.
While each case must be assessed on its own facts, the NFO says the reports underline the need for the industry to consider whether additional safeguards are required to protect consumers and prevent abuse.
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