State targets funeral cover

Sanlam and Lion of Africa Assurance are among insurers whose sale of funeral policies for children on welfare has led to a confrontation with the government, which wants to end the practice.

Agents for the companies and other insurers sell policies to parents or guardians who receive the welfare grants on the children’s behalf. The forms they sign include a written mandate permitting a deduction directly from the grant before it’s paid into their bank accounts.

People on welfare are among the least educated and many don’t understand what they are committing to, according to the state welfare agency. The SA Social Security Agency (Sassa) is “inun- dated” with complaints about deductions people say they had not knowingly approved, it said in a court submission related to the issue.

Disputes with Sassa highlight the tension over how financial firms are allegedly profiting from the country’s poorest people. Government agencies are scrutinising the practice to try and protect welfare recipients, prompting both companies to go to court to stop the government from taking action in cases that will be heard this month.

Sassa wants to ban deductions from social grants for funeral policies for children.

Of South Africa’s 53 million people, 16.9 million receive welfare payments. The state paid R129 billion in social grants in the past financial year and statistics show more people receive welfare grants than are in work.

The insurance policies drain money from grants that should cover people’s basic needs, the government says.

Lion says it’s providing a service that protects people on welfare from major costs in the case of death. Sanlam, in submissions to court made by its Channel Life unit, is arguing funeral cover deductions are being included unfairly in a clean-up designed to eliminate illegal deductions for products and services including mobile phone airtime and loans. – Bloomberg