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Funeral insurance deductions from social grants – case postponed

Following amendments to the Social Assistance Act.

PRETORIA – The Pretoria High Court has postponed an application brought by Sanlam subsidiary, Channel Life Limited and Sanlam Developing Markets against the South African Social Security Agency (Sassa) to, among others, allow for properly authorised deductions of funeral insurance premiums from social grants.

The dispute between the parties centres primarily on the “clean up project” undertaken by Sassa in September 2015, to verify whether beneficiaries of social grants had properly consented to the deductions of funeral insurance premiums from their grants.

Although Channel Life and Sanlam brought the application, they requested a postponement following the gazetting of new regulations by the Department of Social Development on May 6, which materially impact on deductions from social grants.

The applicants requested the case be postponed following the regulatory changes so that they could properly consider the impact of the new regulations on their application.

This was granted in the High Court on Tuesday and the case postponed indefinitely.

In order to avoid any prejudice against Sassa and enable it to continue with its clean up project, the court overturned an interim order made on March 1, and brought on an urgent basis by Channel Life, to the effect that Sassa was compelled to continue making these deductions.

Instead, Justice Petersen ordered that, where Sassa wants to stop a deduction from a grant because it believes it has been unlawfully obtained, it must give one month’s notice to the insurer, and must provide the particulars of the grant beneficiary as well as its reason for wanting to stop the deduction.

New law prohibits deductions from grants for children

Regulation 26A of the Social Assistance Act – which provides for circumstances under which a deduction may be made directly from a social grant – was amended on Friday so that deductions may no longer be made from child support grants, foster child grants, care dependency grants and social grants that do not exceed 12 months.

Following revelations that funeral policies were being widely sold to social grant recipients, Sassa embarked on a clean up project to “regularise unlawful funeral premium deductions”.

Sassa argues that these deductions are unlawful since written consent from the beneficiary has not been provided to the Agency itself, or else is potentially fraudulent or ill informed.

It emerged during Sassa’s investigations that funeral policies had been sold to adult recipients of child support grants, and were being paid for via the grant money intended for the child.

Friday’s regulations have put a stop to this, with a six-month grace period given to financial services providers to comply.

In terms of regulation 26A, Sassa may permit only one deduction per month, not exceeding 10% of the value of a beneficiary’s social grant, for a funeral policy issued by a registered insurance company.

A significant amendment introduced on Friday is that the beneficiary of the grant must consent to the deduction in writing and submit the consent in person to Sassa or, where such is not possible, make alternative arrangements.

750 000 funeral policies paid for by grants

At August 2015, Sassa found that more than 715 000 deductions were being made from social grants to pay for funeral policies. That number has since increased.

According to Sassa, Channel Life had 171 000 policies at February 2016, which were being paid for from social grant deductions.

Concerned with the validity of the requests by beneficiaries, upon which basis insurance companies compel the Agency to enforce deductions, Sassa argues that the only way to eliminate the risk of unauthorised deductions (due to fraud, duress or misinformation) is through direct contact between Sassa ad the beneficiary.

 

 

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