MEMBERSHIP STRUCTURES NOT PART OF THE PROTECTION RULES

The Policyholder Protection Rules (PPR) do not make any allowance for a life assurance company to sell a funeral policy (assistance business) to another party, such as a funeral parlour, that allows consumers to become contributing “members” of the policy.

Life assurance companies are attempting to pass off as group business the practice of selling a single policy to a funeral parlour.

But the PPR define an “assistance business group scheme” as the provision of policy benefits where:

Individual persons are the policyholders;

There is no individual underwriting (such as a medical assessment);

The individuals whose lives are insured under the group scheme directly or indirectly pay the premiums to the life assurer;

The policy may be cancelled by either the policyholder or the assurer; and

The policy provides term cover only – that is, there is no investment value.

The PPR also state that “group” means two or more people who, on the basis of group underwriting, have entered into a policy with an assurance company through an administrator (such as a funeral parlour) that has been given a mandate by the life assurer to facilitate its policies.

An “administrator” means a person or an entity that has a written mandate from an assurer to do administrative work in respect of a specific assistance business group scheme and that is licensed as a financial services provider in terms of, or who is a representative as contemplated in, the Financial Advisory and Intermediary Services Act.

A life assurance company’s agreement with the administrator of a group policy must include the following:

The premium rates that will be charged by the assurer, including the commission payable to an intermediary.

Any fees that will be added by any other party.

If the administrator collects the premiums and pays them over to the life assurance company, when the premiums will be paid to the assurer, the assurer’s right to audit the administrator’s books, and for the administrator to provide the assurer with the names and identity numbers of the policyholders and the names of the beneficiaries.

If the assurer authorises the administrator to pay out claims to policyholders, the circumstances under which it may do so.