Watch out for these insurance scams

Now that scammers have found it’s not so easy to get their dirty fingers on your bank account, they are finding other ways, such as insurance scams, to steal money.

From false and padded claims to fraudsters swindling unsuspecting consumers out of their vehicles, savings and personal belongings, scams have been wreaking havoc and causing a ripple effect of damage across the insurance landscape, says Funeka Ngewu, executive head of claims at Momentum Insure.

“Among the many scams running at the moment, insurers note an alarming increase in criminals impersonating policy holders and brokers to obtain copies of clients’ policy schedules and claims histories.

“The criminals then use this information to conduct criminal activity, such as identity theft, submitting false claims to receive payouts to their own bank accounts in the policy holder’s name and financial fraud.”

She says syndicated scams are even approaching vulnerable employees of insurance companies to coerce them into selling registration documents or vehicles that have been recovered after theft and kept as salvage.

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Beware of fake accounts for insurance

Scammers also create fake accounts and trick consumers into thinking they are paying their insurance premiums or buying new insurance products, when in fact they are depositing funds into these fake accounts. Ngewu says some clients have lost money and fallen victim to this tactic.

This phenomenon is not at all uncommon. Meta recently revealed that of the 2.59 billion active Facebook users in 2023, around 4-5% of these accounts were fake. Recent research also showed an increase in brand impersonation schemes, with criminals impersonating prominent companies and creating fake websites to scam consumers into giving away personal data, payments and more.

“We see a lot of claims where clients are unfortunately handing over their car keys to scammers who pose as buyers, falsely claiming that they transferred money to pay for the car they bought into a client’s bank account. In some cases, we find that some clients are involved in the scam and work with a scammer to swindle their insurer.”

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Policy holders are also the culprits

However, it is not only scammers who give the insurance industry sleepless nights. Policy holders also submit false claims, including claims on policies where the insured did not disclose important and relevant information to the insurer. These are among the most common types of scams affecting the insurance industry.

Ngewu says that this is often the result of a misconception that insurance companies can self-fund these losses and will not “miss” the money. However, the reality could not be further from the truth, as false claims directly affect profit margins, resulting in higher insurance premiums for all policy holders.

“We put a number of measures in place from a fraud module perspective and created specialised tools and systems to detect fraudulent claims. As such, several scammers have been caught and some are facing criminal charges,” Ngewu says.

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Take steps to avoid falling prey to scams

Dealing with an incident of being scammed is often stressful and emotional and taking action to avoid falling prey to criminals is the first step to keep yourself and your loved ones safe.

Ngewu says consumers must question everything, especially when an offer seems unrealistic, rushed, or too good to be true. Before buying online or handing over any personal information, you have to verify the credentials of the person or company you are transacting with.

“Insurers also play an important role in protecting policyholders against fraud and scams. Always check with an insurer directly before buying any insurance products or agreeing to any services.”

In the event that you become a victim of an insurance scam and/or fraud, the insurer can also assist in investigating the incident by reviewing any relevant transactions or communications related to the scam and providing advice on the claims process.