Life insurance fraud: More than R787 million in fraudulent claims uncovered

The Association for Savings and Investment South Africa (Asisa)’ 2021 fraud statistics paint a grim picture of life insurance fraud and sham claims being committed in the industry.

Asisa revealed South African life insurers detected 4 287 fraudulent and dishonest claims worth R787.6 million across all lines of risk business in 2021.

This is a significant increase from 2020, when 3 186 cases of fraudulent and dishonest claims to a value of R587.3 million were uncovered.

Life insurance fraud

2021 fraud statistics

The statistic show that funeral insurance once again attracted the highest incidence of fraud and dishonesty, followed by death cover, disability cover, hospital cash plans and retrenchment benefit cover.

Megan Govender, convenor of the ASISA Forensics Standing Committee, attributes the surge in exposed fraudulent and dishonest claims to the deployment of sophisticated detection mechanisms by the long-term insurance industry to stop fraud and dishonest.

He said the R787.6 million in fraudulent and dishonest claims detected in 2021 may seem like a negligible amount when compared to the R608 billion in claims and benefit payments made to honest policyholders and their beneficiaries in 2021 – the highest ever paid in a single year.

Higher premiums

However, Govender adds that if left unchecked, fraud and dishonesty would have the biggest impact on honest policyholders who would ultimately have to pay higher premiums to make up for untenable claims rates.

“In 2020, the lengthy Covid-19 lockdown prevented our forensic investigators from physically going out into the field, which plays an important part in uncovering syndicate operations and taking a closer look at other criminal activities such as suspicious unnatural deaths.”

“However, by 2021 our field investigations were largely back to normal, and the success rate is reflected in these statistics,” Govender said.

Fraud rampant in KZN, EC and Gauteng

Govender reports that the bulk of fraudulent and dishonest claims were uncovered in KwaZulu-Natal (KZN) and the Eastern Cape, followed by Gauteng and the Northern Cape

Govender warns those contemplating a crime to gain access to an insurance pay-out that the chances of being caught are extremely high with the consequence most likely a lengthy prison sentence or a hefty fine.

ALSO READ: Cele slams court after Khayelitsha mass shooter granted R800 bail