Two weeks ago, the Financial Services Board (FSB) issued a stern warning against Blue Dot Funeral Home and Matshidiso Funeral Scheme.
The FSB is an independent institution that oversees the non-banking financial services industry.
A similar warning was issued against the same companies in 2009.
Client liaison officer for FSB, Logan Ramalu, said both these entities had failed to abide by the Long-term Insurance Act 1998 (LTIA) and the Financial Advisory and Intermediary Services Act of 2002 (FAIS Act).
Ramalu said the majority of complaints related to non-payment of claims as these entities allegedly did not have the funds to settle all valid claims.
"These entities are neither registered long-term insurers nor financial services providers as required by [law]. Accordingly, there is no guarantee that claims will be paid when they need to be, as would be the case with a registered long-term insurance product," said Ramalu.
But Ramalu would not be drawn into how and why these schemes continued to operate despite being debarred in 2009 for a period of five years from applying for new licences.
Efforts to contact Matshidiso's top official Lucas Gadibolae Nganga and Blue Dot for comment were fruitless as their numbers "do not exist anymore".
Asked about whether the board had powers to shut down companies, Ramalu said their mandate was to ensure that entities conducting business in the financial services sector were financially sound and to ensure that when policy benefits become due, policyholders' claims were settled.
Ramalu said the FSB was engaging the relevant parties and that an investigation was under way.
"Regulatory action will be taken against the companies and individuals involved, for contravening the provisions of the legislation," said Ramalu.
Source: Sowetan via I-Net Bridge
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