Kidnapping and murder rife in insurance fraud
The Insurance Crime Bureau’s (ICB) 2020 Annual Report sheds some light on the extent to which criminals and criminal syndicates will go to extract money from the insurance industry. It reported on the outcome of investigations into various life and non-life insurance frauds that were committed in recent years, starting with two successful cases taken through different divisions of the South Africa High Court.
Kidnap and murder rife in life fraud
Five accused were found guilty by the Pietermaritzburg High Court, with three of the five sentenced for murder, attempted murder and fraud. Accused four and five were sentenced for conspiracy to commit murder, attempted murder and fraud. “The accused took life and funeral policies on unrelated persons lives and killed them for pay-outs from the benefits of the policies,” noted the ICB. Three more accused, pronounced guilty by the Oudtshoorn High Court, were sentenced for murder and defeating the ends of justice, in the case of accused one and two, and for conspiracy to commit murder, for the third. The principle accused had taken out policies on her husband’s life and arranged for a hitman to kill him.
The list of pending High Court matters is equally concerning, with the ICB hoping for successful prosecutions in five cases involving various contact crimes such as kidnapping, murder and rape as well as countless charges of fraud. These cases illustrate the lengths to which accused will go to claim fraudulently against a life insurance policy. And the synopses make for chilling reading:
- The accused made use of a hitman to kill her family members, claiming the pay-outs once they were killed.
- The accused took policies in a person’s name, after he had promised him employment, also opening bank accounts in that person’s name. He then targeted a homeless person and shot him and proceeded to claim on the policy.
- The accused was a pastor who helped churchgoers open bank accounts and made himself the beneficiary on their policies in the hopes of killing them to obtain policy pay-outs.
- Two sisters obtained policies on their mother and with the assistance of their boyfriends, murdered her.
- The syndicate would obtain policies on unsuspecting persons and then kill them for policy pay-outs.
An accumulated R1.1 billion saving
The ICB was established in 2008 with the goal to combat insurance fraud and organised crime throughout South Africa. The organisation acts as a hub for gathering and sharing insurance data and intelligence with its members, who include banks, insurers and various third party suppliers to these industries. It is estimated that this collaboration has resulted in an accumulated R1.1 billion in ‘returns’ to members since operations began. Savings to the non-life industry come in the form of the return of stolen vehicles to member firms totalling R568 million, in the 2020 financial year alone. Vehicle values are calculated at approximately 40% of their MM value. Savings to the life industry total around R301 million through FY2020, largely thanks to the prevention of fraudulent claim pay-outs.
“Apart from the considerable recoveries we make for our members, we also provide a gratuitous benefit for the non-insured public by recovering millions of rand worth of vehicles for them at no cost to the owners,” said Ronnie Napier, chairman of the ICB. This follows the return of some R323 million worth of vehicles to uninsured individuals in the latest financial year.
Hugo van Zyl, COO at the ICB, said that the organisation was involved in the detection and prevention of physical crimes such as robberies, carjacking and vehicle theft, which posed significant risks to the non-life insurance sector. “Although the impact of the arrests and other successes cannot be measured in the short term, we are of the opinion that this has a huge impact in making South Africa a safer place and minimising risk for the industry,” he wrote. One of the key initiatives for 2020 was the inclusion of the ICB in the National Vehicle Crime Forum’s strategic approach to reduce vehicle crime. Stakeholders will work together to ensure the implementation of intelligence-guided policing to identify vehicle crime syndicates; effective destabilisation and eradication of vehicle crime syndicates; addressing system-related dysfunctions that will reduce vehicle-related crime; and ensuring the development and implementation of a communication strategy and awareness campaigns.
Fast-tracking digital strategies
Garth de Klerk, CEO at the ICB, noted that COVID-19 had forced the business to fast-track digital strategies and solutions to enable a remote working environment. “We are happy with the positioning of the Insurance Crime Bureau within the industry, and we are comfortable with the organisation’s financial strength as well as the operational returns provided to its membership base,” he said. There was, unfortunately, an increase in opportunistic insurance fraud in the wake of pandemic and lockdown. It was, for example, easier to ‘get one over’ the insurer in an environment where laptop, smartphone and tablet claims were being fast-tracked. There was also a notable rise in fake retrenchments and UIF fraud; credit life submissions; credit insurance losses; and staged ‘slip and trip’ incidents to name a few.
De Klerk noted that the 2021 focus would shift toward addressing emerging economic risks and developing appropriate responses to cyber threats. We conclude today’s newsletter with comment from Selvan Naidu of Standard Bank Group, which is a member of the SAICB: “Our relationship with the Insurance Crime Bureau contributes towards our focus on our clients having peace of mind; we believe that safety is a key differentiator in the financial sector and fostering networks with organisations such as the ICB helps us keep in the forefront of [combatting] crime and emerging risks”. He noted that information and data formed the basis for eliminating crime and that the sooner stakeholders in the financial services industry worked together in a frictionless and collaborative way, the sooner the battle would be won.
Writer’s thoughts:
Historic data supports that all types of life and non-life insurance frauds increase during periods of economic hardship. Financial advisers and short-term insurance brokers are at the frontline of insurance claims and serve as a good first line of defence against fraud. Have you been on the receiving end of any questionable claims from clients since lockdown started? And what do you consider to be best practice in dealing with such matters?