Financial ombud calls for ‘proof of consent’ to curb insurance murders

The National Financial Ombud Scheme South Africa (NFO) wants tougher rules to stop people from secretly taking out life insurance on others and potentially profiting from their deaths.

The NFOS’s life insurance division is calling for insurers to be required to obtain proof of the assured’s informed consent before issuing a policy taken out by another person.

The proposed reform is aimed at closing vulnerabilities that could be exploited in “money for murder” cases, where beneficiaries are accused of arranging or participating in the deaths of policyholders to collect insurance payouts.

According to the Association for Savings and Investment South Africa, life insurers detected 38 murder-for-money cases in 2024, up from 14 cases in 2023.

The NFO said requiring informed consent would ensure people know insurance cover exists on their lives, who took out the policy 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,” said Denise Gabriels, lead ombud of the life insurance division.

The NFO believes the Financial Sector Conduct Authority, in consultation with stakeholders, should consider introducing conduct standards or regulatory requirements that make proof of informed consent mandatory before a policy is issued on someone’s life.

Gabriels said insurers had processes aimed at confirming insurable interest and preventing fraud, but industry practices were not always uniform.

She said a consistent regulatory framework would improve standards across the industry and promote better outcomes for consumers.

“The proposed reforms come as the NFO continues to deal with disputes involving beneficiaries suspected of having played a role in the deaths of insured people,” said Gabriels.

The NFO has adopted an approach that generally prevents it from ruling in favour of a beneficiary while the beneficiary remains under suspicion and a criminal investigation or court proceedings are under way.

Where a criminal case has been opened against a beneficiary, the NFOSA will generally refrain from investigating the beneficiary’s complaint until the criminal matter has been finalised.

A beneficiary may return to the NFO after a court verdict, withdrawal of charges, a decision by the National Prosecuting Authority not to prosecute and the issuing of a certificate of nolle prosequi, or another final disposition.

However, the NFO said stronger safeguards must be balanced with the rights of innocent beneficiaries.

Gabriels warned that criminal investigations can take years and beneficiaries should not be left in limbo indefinitely.

“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.