Ombud slams Khayelitsha burial society for failing to honour claims

A funeral scheme operating in Khayelitsha, Cape Town, has been slapped with three separate rulings by the Office of the Ombud for Financial Services Providers (FAIS ombud) after failing to carry out its duties as a financial services provider. Despite faithfully paying their premiums, the consumers were placed under financial strain when Luvuyo Burial and Consulting failed to honour their valid funeral claims.

In each case, the ombud ordered Luvuyo to settle the unpaid policy benefits, pointing to repeated violations of the policyholder protection rules and the treating customers fairly principles.

In all three cases, the funeral scheme was ordered to pay the complainants their funeral benefit of R10,000 plus interest of 11.25% calculated from the date of determination to the date of payment.

Incorrect information

In the first case, the complainant took out a funeral policy with Luvuyo on 17 January 2020. She submitted a claim under the funeral policy on 30 March 2024 after the death of an insured member.

On 18 April 2024, she received an SMS informing her that the claim had been declined because the deceased’s identity number had been recorded incorrectly on the policy. In its response, the company claimed that numerous messages had been sent to clients regarding the correction of identity numbers and that the complainant had not responded.

However, Luvuyo was unable to provide proof of the SMSes it sent to the complainant because they had been sent in bulk to all clients. The company later offered to settle the matter with a payment of R10,000 in four instalments of R2,500. However, no payments were made.

Under the policyholder protection rules, consumers are bound to tell their insurer the truth. If you tell your insurance company something that’s not true, or forget to tell it something, your insurance could be cancelled if the information is considered materially important.

The ombud, however, found that Luvuyo had failed to comply with Outcome Six of Treating Customers Fairly legislation, under which they “should not face unreasonable post-sale barriers when they want to change a product, switch providers, submit a claim or make a complaint”.

The ombud’s office found that only the last digit of the deceased’s identity number was reflected incorrectly. The age was still correct. The incorrect identity number did not materially affect the insurer’s ability to assess the risk under the policy. The claim was valid, and the benefit should have been paid to the complainant.

Failure to pay a claim

In the second case, the complainant had taken out a funeral policy with Luvuyo on 6 May 2020. On 25 June 2024, after the death of a listed member under the policy, he submitted a claim of R10,000.

However, despite his attempts to follow up with Luvuyo, the complainant did not receive the claim payout.

Luvuyo did not deny any aspects of the complaint and, on 23 January 2025, agreed to pay the complainant R4,000 on 31 January and R6,000 at the end of February. However, no payments were made. Even after numerous follow-ups by the ombud’s office, the claim remained unpaid.

The policyholder protection rules state that an insurer must, within two business days of receiving all required documents in respect of a claim under a microinsurance policy or funeral policy, assess and decide whether the claim is valid and either authorise payment of the claim, repudiate the claim, or dispute the claim and notify the claimant of the dispute.

Another failure to pay a claim

In the third case, the complainant lodged a complaint with the ombud on 26 November 2024 after Luvuyo failed to fulfil a claim for a funeral benefit of R10,000. During the investigation, Luvuyo did not dispute the validity of the claim and, on 23 January 2025, agreed to pay the complainant four equal instalments of R2,500. Despite this acknowledgement, no payments were made. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.