Disturbing Levels Of Insurance Fraud In South Africa
Despite dominating the news cycle, there has been a decrease in fraudulent and dishonest life insurance claims.
Fraudulent and dishonest life insurance claims have made headlines recently after a woman was arrested for the murder of family members, including her husband and three children, to cash out insurance policies.
That said, the Association for Savings and Investment South Africa (ASISA) said that the number of such claims have been dropping – declining from 4,287 recorded in 2021 to 2,618 in 2022.
They did, however, account for 29% of the total 8,931 cases of fraud and dishonesty recorded in 2022.
Funeral insurance was the number one claim (1,922), followed by death cover (399), disability cover (164), hospital cash plans (98), and retrenchment/loss of income benefit cover (35). The rand value of these claims amounted to R770.5 million in losses prevented, with actual losses totalling R17 million.
Most fraudulent and dishonest claims were in KwaZulu-Natal, with Gauteng, the Eastern Cape and Western Cape following.
Overall, the industry saw a R77 million loss due to fraud and dishonesty, but losses amounting to R1.1 billion were prevented altogether.
Dishonest Game
Craig Baker, CEO of MiWayLife, said that a third of insurance claims have an element of dishonesty.
“Most people are not wilfully dishonest – however, their claims may have been repudiated if they’ve failed to disclose material information when claiming against a new policy, for example,” he said.
Since 2020, MiWayLife and its forensic team found that 8% of claims contained cases of wilful misrepresentations and fraudulent claims.
“Notably, the Covid-19 pandemic contributed to a rise in anti-selective behaviour,” said Baker.
However, it is not only policyholders who commit fraud.
“Sales representatives across the industry can sometimes be lured into partaking in illegal activity. It goes to the extent of tricking members of the public into being involved in criminal schemes for financial gain, with and without their knowledge,” Yazeed Adams, head of risk and compliance at MiWayLife, said.
“Be careful not to get caught in the web of illicit activity, even where the offer is lucrative and purported to be foolproof. Do not give your identity document and telephone numbers to people who approach you with the promise of sharing in the spoils.
“Also, be careful when receiving digital communication, including WhatsApp, where the person spins a story where they need assistance with one-time PINs sent to your phone. Often attempts to get people involved present offers that are too good to be true, if it feels that way to you then it is probably a scam of some sort.”
AI’s Help
The fight against fraud has also been improved through AI, which can bring intentionally dishonest policyholders to book.
“We estimate that fraud cases are increasing as people look at how to gain monetary benefit from financial products. However, such an increase is difficult to quantify because we only know what we can see. Some insurers claim fraud accounts for less than 3% of claims, but medical and life fraud can reach double digits,” said Garth de Klerk, CEO of the Insurance Crime Bureau (ICB).
“The fact that we’re becoming more efficient at tackling crime is due to the fact that we’re not only using sophisticated AI tools – we’re also training people to develop at the same pace as the systems we are using.”
Although the insurance industry is getting better at tackling fraud, increasing criminal activity means the public should remain vigilant.
“Crime in South Africa is a contact sport, even when it comes to fraud,” de Klerk said.
“We urge people to be alert, treat strangers with the necessary caution, and question anything that sounds too good to be true. Fraudsters are often well-dressed, charismatic individuals who win trust easily.”