How safe are you from insurance fraud?
If you suspect you may have been the victim of identity theft, notify the authorities immediately.
An unfolding murder case against former Thembisa SAPS Sgt Rosemary Miya Ndlovu has put insurance fraud back in the spotlight.
Ndlovu is accused of plotting a series of murders targeting members of her family during which she fraudulently claimed an estimated R4-million from several insurance policies.
BrightRock’s head of the legal team, Glenn Hickling, has addressed some questions to educate consumers about insurance fraud and how it applies to them.
He believes the public can learn a lot more about insurance fraud by simply being informed.
What is insurance fraud and what are some of the most common frauds?
Insurance fraud is a deliberate act of deceit – such as withholding material information or providing false information – to benefit unlawfully from an insurance policy. Insurance fraud can be committed against an insurance company or an agent of the insurance company.
The perpetrators of fraud may include people applying for cover, policyholders, third-party claimants and beneficiaries, and service providers, as well as intermediaries or employees.
Some of the most common forms of fraud are padding or inflating insurance claims, providing false information on an insurance application or submitting false claims. Extreme cases of fraud may involve staging an accident, faking an injury or death or syndicate schemes where professional fraudsters coordinate and execute complicated fraud strategies.
How prevalent is insurance fraud in SA?
According to statistics released in August 2021 by the Association for Savings and Investment South Africa (ASISA), there was a 12% increase in fraudulent life insurance claims from 2019 to 2020.
Last year, 3 186 such claims, totalling R587.3-million, were recorded compared with 2 837 claims (R537.1-m) in 2019. The highest incidence of long-term insurance fraud last year (2 282 claims) was in funeral policies.
The Insurance Crime Bureau estimates that in 2019 up to 20% of the R35-billion paid out on short-term insurance claims could have been fraudulent. This means that in 2019 alone, the South African short-term insurance industry lost almost R7-b to fraud.
What makes people vulnerable to insurance fraud?
Most insurance clients would never consider submitting a fraudulent insurance claim. However, industry statistics suggest that people are more likely to commit insurance fraud in times of economic hardship.
As seen from the ASISA statistics, over the past year insurers have experienced a dramatic rise in fraudulent behaviour, indicating that the tough economic conditions have led more people to commit some form of insurance fraud.
A recent example ASISA has come across is the submission of fraudulent funeral policy claims where the death certificates have been falsified.
They have also seen an increase in cases of non-disclosure, where clients have misrepresented or held back information about their health or financial risks when applying for cover.
In the case of funeral insurance, it is somewhat easier for fraudsters to try their luck, as these policies don’t require any medical reports or blood tests to payout and pay out far more quickly than a life insurance policy.
What measure can consumers take to prevent a fraudster from taking out insurance policies in their name(s)?
Identity theft is a common problem in South Africa, and internationally, cybercrime is on the rise, exacerbating the problem. It’s therefore vital for people to protect their personal and financial information.
This includes not sharing your ID number and other personal information with an unauthorised person, not clicking on suspicious links, and keeping your financial documents and information secure.
If you suspect you may have been the victim of identity theft, notify the authorities immediately. Should you discover that any insurance or other financial product has been taken out in your name without your consent, immediately notify the company in question.
It’s also a good idea to regularly check your bank statements and payslips. If you spot any debit orders or deductions, you’re unfamiliar with, notify your bank or your company’s HR department immediately and the financial service provider in question.
