Insurance fraud is an act of deceit carried out by providing false information to an insurance company or withholding information from an agent of an insurance company, the result of which would be a monetary benefit from an insurance claim. Some common forms of fraud are padding insurance claims (inflating the amount of a claim to make up for the deductible the policyholder would have to pay in the case of a claim), submitting false claims, staging an accident or faking a death or an injury.
The insurance industry's representative body, the Association for Savings and Investment South Africa (ASISA), says insurance fraud is rife in South Africa. Funeral insurance, in particular, has always been a soft target for criminals as these policies are designed to pay out quickly without the need for blood tests or medical examinations.
According to Moonstone Information Refinery, in 2019, 1783 funeral claims were recorded to the value of R54.2 million. This value increased to R80.8 million in 2020 with 2282 reports of fraudulent and dishonest claims.
COVID-19 has led to significant job loss and desperation. In times of tough economic conditions, there are always heightened levels of crime. The pandemic has also resulted in an increased level of death which has opened the door for criminals to source dead bodies from flooded mortuaries for false claims.
Aside from false claims with purchased or stolen bodies, there is the 'hit and run' crime. Funeral policies impose a waiting period for deaths due to natural causes, preventing people from only taking out policies when they know they are sick. It has happened that families desperate for a pay-out orchestrate unnatural deaths after the family member has died (from natural causes).
In one instance, a body (of the deceased) was placed in the middle of the road to be hit by a car. A hit and run accident was reported, and a claim was lodged. In other instances, the vulnerable from communities are targeted, like drug addicts who are lured on the pretence of a job. After all of their personal information is obtained and a policy is taken out in their name, they are murdered and insurance money is collected.
There is no limit to the number of funeral policies that a person can have. At least 80% of South African's have at least one funeral policy, some have more. While there is no limit to the number of funeral policies you can have, and nothing in the Long-Term Insurance Act that deals with "over-insurance", there are insurers who won't insure any one person for more than a set amount and there are those that will pay only a certain number of polices on a particular person's life. This is according to Jennifer Preiss, the deputy ombudsman in the office of the Ombudsman for Long-term Insurance.
Protect your personal and private information on and offline as identity theft has become a common problem. With the rise in cybercrime, one has to be hyper-vigilant to protect personal information. Don't, for example, click on suspicious links or give information to unauthorised people. It is also essential to check your payslip to make sure there are no add-ons that you did not agree to. You should also check bank statements to ensure that there are no irregularities. If you do become aware of an insurance product purchased in your name, it is vital that you get in touch with the company immediately.
Insurance companies have a wide range of safety measures that they have put in place to protect them from fraud and to detect fraud. As technology has developed, so have their measures. They are now using artificial intelligence and big data to spot inconsistencies, incomplete or inaccurate information. Digital technology is also very effective in verifying and cross-checking information across industry databases and social media.
In an interview, Donovan Herman, convenor of the ASISA Claims Standing Committee says that honest policy holders will end up paying higher premiums because of untenable claims rates as a result of fraudulent and dishonest claims.
Many insurers have a forensic unit solely dedicated to investigating fraud, where you can report to them anonymously. There are also whistle-blower hotlines, the polices and / or the Insurance Crime Bureau, a non-profit organisation dedicated to fighting organised insurance crimes and fraud in the insurance industry.
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