Ina Opperman

By Ina Opperman

Business Journalist

This is why and how we can stop insurance fraud

Insurance fraud has been in the news with people murdering their relatives to get their hands on their life insurance money.

Insurance fraud is increasing and it is up to all of us to stop it. According to the Insurance Crime Bureau’s 2023 report, funeral insurance topped the list of fraudulent claims, followed by death cover, disability cover, hospital cash plans, retrenchment and loss of income cover.

A total of 1 922 cases were reported, while the staggering rand value of these fraudulent claims amounted to R770.5 million in losses prevented, underlining the substantial financial implications of insurance fraud. Despite efforts to combat fraud, the industry still suffered a significant loss of R77 million due to fraudulent activities, Glenn Hickling, head of legal at BrightRock, says.

Why do people commit insurance fraud? Hickling says economic hardship often push people toward desperate measures. “In tough times, fraudulent behaviour becomes even more tempting. Falsifying death certificates for funeral policy claims or withholding crucial health information during application processes are just some examples of this deceit.”

He says extreme cases of fraud may involve staging an accident, faking an injury or death, or syndicated schemes where fraudsters coordinate and execute complicated fraud strategies. “Even seemingly harmless actions like exaggerating income or omitting medical history can have serious repercussions.”

Insurance providers will not hesitate to repudiate claims, rendering individuals uninsurable and in some cases, subjecting them to criminal prosecution, Hickling warns.

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Surge in fraudulent and dishonest claims concerning

“The surge in fraudulent and dishonest life insurance claims has emerged as a troubling reality in South Africa and beyond, casting a pervasive shadow of distrust over the insurance sector. Recent headlines underline the alarming trend of individuals exploiting diverse forms of insurance cover for financial gain, underscoring the widespread prevalence and consequential impact of insurance fraud within our society.”

According to the Association for Savings and Investment South Africa (ASISA), sales representatives in the industry have also been implicated in illegal activities, encouraging members of the public to join criminal schemes for monetary gain, with and without their knowledge.

“In 2022/2023, sales fraud accounted for 57% of all fraud cases recorded and remains a persistent threat. It is commonly achieved by manipulating clients or falsifying policies without their knowledge, solely to earn commission. This unethical practice further affects trust in the insurance industry.” 

Hickling says the surge in insurance fraud is also bolstered by sophisticated techniques like generative Artificial Intelligence (AI), which poses a significant threat to South Africa’s non-life insurance sector.

“The proliferation of AI tools, such as ChatGPT, has enabled fraudsters to employ deep fake video, voice spoofing, document forgery, advanced social engineering, email phishing and synthetic identity fraud, amplifying the complexity of fraudulent activities.”

He points out that chat platforms with instant shareability features further escalate the risk of fraud. Given this landscape, detecting fraudulent claims is becoming increasingly challenging.

ALSO READ: Me, commit insurance fraud? Never!

What consumers and the insurance sector do to protect themselves?

Hickling says vigilance is very important. “Safeguarding personal and financial information, refraining from clicking on suspicious links and promptly reporting any signs of identity theft are crucial steps.”

In addition, maintaining honesty when you deal with your insurer is also important. “An insurance contract relies on mutual trust and disclosure and therefore, any deviation from this undermines the very foundation of the agreement.”

Hickling says insurance companies also have a role to play in combatting fraud. “With advanced forensics teams, AI and cutting-edge technology, they must further step up their efforts in fraud prevention and detection.”

Collaboration within the insurance industry is very important to curb the escalating trend of fraudulent activity, he says. “Protecting both the industry and policyholders is vital, as unchecked fraud could result in increased premiums or reduced coverage, worsening the protection gap for policyholders already grappling with economic hardships.”

In the face of rising living costs, maintaining affordable insurance and prioritising customer retention are vital considerations, he says.

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