Change in the definition of "Beneficiary"

As contained in Schedule 2 of the Insurance Act 18 of 2017

At the time, the impact of the change was taken up with the Prudential Authority. The Authority provided further clarification regarding the application of employer, committee or trustee discretion in the determination of beneficiaries under group life insurance policies, indicating that the omission of such discretion from the definition of "beneficiary'' was deliberate in its statutory construct.


As a result, existing policy contracts incorporating such forms of discretion are no longer permitted. Our insurers therefore have updated the group insurance policies with the following changes with effect from 1 December 2021:


  • Compliance with the definition of "beneficiary'' in the Insurance Act

  • Payment of benefits will only be paid into a bank account held in the Republic of South Africa in the name of the Beneficiary.

As a result of the policy update, members are required to nominate beneficiaries who will receive the family benefit when a member passes away. The employer is required to keep regularly updated Beneficiary Nomination Forms for all employees' unapproved group insurance benefits on record. This will ensure that the insurer pays their unapproved death and funeral benefits according to their final wishes, and that the payment is not made to the deceased member's estate.


FREQUENTLY ASKED QUESTIONS in this regard and general information about the change


What are unapproved benefits, and how are they different to approved benefits?

Unapproved benefits are the benefits (risk cover amounts) available to a person through a life assurance policy where the employer is the policyholder. In other words, the employer takes out the policy on behalf of an employee.

Approved benefits are the cover amounts available to a fund member, where the policyholder is a retirement fund.


What are the main changes that Insurers are making to the payment of unapproved benefits?

In the past, an Insurer paid unapproved group risk benefits to the employer, or to persons nominated by the employer. In the future the Insurer will not be able to do this because of changes to the Insurance Act. Unapproved benefits will only be paid to the people nominated by the deceased employee on their beneficiary nomination form.


IF THERE IS NO NOMINATION FORM

If there is no completed nomination form, the Insurer will make payments as follows:

For Family Cover – The benefits will be paid to one immediate family member. That person will need to give us evidence of their family relationship to the deceased or their rights to the deceased’s estate.

Group Life - These benefits will be paid into the deceased’s estate.


Will the Insurer be updating their policies to show this change?

Yes. Their current policies allow them to pay unapproved benefits to the policyholder (employer), or to a third party nominated by the policyholder. The Insurers are updating all their policies to state that this is no longer allowed in terms of the Insurance Act.


When will this change happen?

The change will come into effect from November 2021/December 2021. The Insurers have already started updating their policy documents and should be sending out documents showing the changes to all unapproved policy contracts in the coming months.


THE NOMINATION FORM

Will the Insurer accept nomination forms that are not on an Insurer letterhead or from a fund administrator?

Yes, they should accept such document as long as the nomination form:

• States what unapproved benefit the nomination is for (eg group life; family cover)

• Is fully completed; signed and dated prior to the death

• Provides only one beneficiary for family cover benefits.


Can more than one beneficiary be nominated for Family Cover benefits?

No. The Insurer only pays a Family Cover benefit to one beneficiary. If more than one beneficiary is named on a Family Cover nomination form, they will only pay one of these beneficiaries.


Can more than one beneficiary be nominated for Group Life Benefits?

Yes. The member must ensure that the form shows the percentage of the benefit that must be paid to each beneficiary and that the total of all the percentage amounts adds up to 100%.


Will the Insurer accept a nomination form that is completed after the death of the deceased?

No. Nomination forms must be completed and dated before the deceased passes away.


Can a nomination form expire? For example, what happens if the nomination form is more than 10 years old when the covered person dies?

No. The Insurer will accept and use the most recently completed and signed form, even if it was filled in many years ago.


Who is responsible for storing the nomination forms?

For unapproved benefits, the employer should retain this form and submit it to the Insurer at claim stage only.


What happens if there is no nomination form for unapproved benefits?

• Group Life Benefits: Will be paid into the deceased’s estate

• Family cover benefits: Will be paid to one immediate family member. Proof of relationship to the deceased should be provided.


PAYMENT

Will the Insurer pay benefits to minors (people under the age of 18 years old) if they are named on the nomination form?

No. If a minor is nominated on a beneficiary nomination form, they will request for the details of the child’s guardian and pay the benefit to that guardian. If there is no guardian, the benefit will be paid into the deceased’s estate.


What information does the Insurer need to make payments to beneficiaries?

The Insurer will need the following up-to-date information about each beneficiary to make benefit payments:

• Full name

• Identity or passport number

• Current contact details

• Current banking details


Some of the above information is asked for on the nomination form, but the details could have changed. So, when the claim is made, the Insurer will request the latest contact details and bank details.


Can an employer pay a benefit to a beneficiary in advance, and then get the money back from the Insurer?

No, the Insurer is not legally allowed to pay the benefit to the employer, so the Insurer will not refund an advance benefit payment made by the employer.


NON-MEMBER CLAIMS

What happens with Family Cover claims for the death of covered children and spouses? Is a nomination form still needed for them?

No. If an insured person who is not the main member passes away, the benefit is paid to the main member. No nomination form is needed. However, the Insurer will need the current banking details of the main member.


COMMENT:

Employers should communicate with employees/members regarding these changes – in particular, the need to complete and update nomination forms, as well as the consequences of not completing these forms.


OPTIMUM EMPLOYEE BENEFITS (PTY) LTD

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