Life insurers haunted by fraudulent claims. Here are the provinces with highest cases

South Africa’s life insurers and investment companies recorded a 46% increase in fraud and dishonesty claims in 2023, which resulted in a loss amounting to R175.9 million.

The Forensic Standing Committee of the Association for Savings and Investment South Africa (Asisa) released its second set of comprehensive fraud statistics for the industry this week, and they showed 13,074 cases were detected, a significant increase from 8,931 cases detected in 2022.

Money lost because of fraudulent claims

The R175.9 million lost due to fraud and dishonesty in 2023 is a 128% increase from the R77.2 million lost in 2022.

“Early detection of fraud and dishonesty prevented losses worth R1.5 billion in 2023 compared to R1.1 billion in 2022.”

Jean van Niekerk, convenor of the Asisa Forensic Standing Committee said it is important for the savings and investment industry to ensure that fraud remains in check to prevent fraud-related losses from spiralling out of control and higher claims rates from driving up premiums for honest policyholders.

He acknowledged that the majority of policyholders and beneficiaries are honest as 95.9% of the payouts to the value of R39.9 billion were made to 892 817 life and funeral cover policies beneficiaries in 2023.

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Methods to minimise loss

Van Niekerk said there are multiple measures that have been deployed by life insurers and investment companies such as using artificial intelligence, improved industry collaboration, and enhanced authentication mechanisms such as biometric customer identification.

“In addition, forensic departments share data on criminal activity via industry bodies geared to facilitate data sharing to combat fraud and financial crime, including the Asisa Forensic Standing Committee.”

The committee’s purpose is to curb fraud by analysing statistics to understand trends, hotspots, and emerging risks at an industry level.

Murder for insurance payouts

There has been an emerging trend of murder for insurance payouts. “Murder is an incredibly serious crime, and committing insurance fraud to benefit financially from someone’s death is not only highly callous but also premeditated to the extreme.”

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Van Niekerk said although criminals look at insurance as a highly lucrative target, cases involving premeditated murder are not that common.

“Out of the 4 130 insurance fraud cases reported for 2023, 14 cases related to the involvement of a beneficiary in the insured’s death.”

Insurance killers

There have been high-profile cases such as former police Rosemary Ndlovu’s. She was sentenced to life imprisonment for killing her relatives and her partner for insurance payouts.

Van Niekerk said the conviction shows that criminals are highly unlikely to get away with this type of crime.

“While life companies pick up on this type of crime very quickly through their data-sharing initiatives, the process of gathering evidence and building a case that will stand up in court is often a slow process.”

Recently, alleged insurance killer Rachel Shokane Kutumela, her elder sister Annah Shokane and daughter Madjadji Flora Shokane abandoned their bail applications at the Polokwane Magistrate’s Court.

The three are accused of nine counts of murder, money laundering, receiving proceeds from unlawful activities, fraud and defeating the ends of justice.

Provinces with high cases of fraudulent claims

The report shows that KwaZulu-Natal has the highest fraudulent and dishonest claims in 2023 by 3,625, which is an increase from 3,122. The second highest is Gauteng, with 2,301 claims, an increase from 1,711.

However, the biggest increase in South Africa was found in the Western Cape. In 2023, there were 1,633 fraudulent claims, which was a 60% increase from 1,020 in 2022.

Although the Eastern Cape recorded the third highest claims in 2023 (1,210), it was the province that experienced the lowest increase of 8%.

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