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Insurers effect sophisticated mechanisms after R787.6m...

Business Maverick

INSURANCE FRAUD STATS

Five outrageous examples of insurance fraud

(Image: iStock)

Just as business starts to get back to pre-Covid or ‘normal’ levels, so too are fraud levels.

South African life insurers detected 4,287 fraudulent and dishonest claims worth R787.6-million across all lines of risk business in 2021, significantly higher than the 3,186 claims valued at R587.3-million in 2020. 

The Association for Savings and Investment South Africa (Asisa), released the industry’s 2021 fraud statistics this week, revealing that, once again, funeral insurance 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 dishonesty.

He says the R787.6-million in fraudulent and dishonest claims detected in 2021 may seem negligible compared with the R608-billion in claims and benefit payments made to honest policyholders and beneficiaries last year. However, he adds, if left unchecked, fraud and dishonesty ultimately affect honest policyholders as premiums increase.

The insurance industry uses preventative measures to combat insurance fraud, including artificial intelligence, data sharing for early detection of trends and an increased focus on field investigations. Govender attributes the lower fraud statistics in 2020 not to less criminal activity but to the long Covid-19 lockdown, which prevented forensic investigators from going out into the field, which plays an important part in uncovering syndicate operations and looking more closely at other criminal activities such as suspicious unnatural deaths. 

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Govender warns those contemplating a crime to obtain an insurance payout that the chances of being caught are extremely high, most likely leading to a long prison sentence or a hefty fine. 

Fraudulent insurance cases include:

  • April 2022: A 60-year-old aunt and 26-year-old cousin were arrested in Mthatha for insurance fraud relating to their deceased relative. The pair forged the deceased nephew’s signature on Old Mutual insurance forms to the combined value of R600,000, but were unsuccessful because the company’s forensic investigators picked up the fraudulent signatures.
  • November 2021: Rosemary Ndlovu received six life terms in prison for murdering several family members so she could receive the funeral insurance payout.
  • November 2021: A pastor and his wife in the Western Cape were found to have taken out life insurance policies on church members with the intention of having them murdered by a hitman for the death benefits. The pastor at God’s Work International Ministries was sentenced to life and 252 years and three months in prison, while his 26-year-old wife received 20 years and the hitman was sentenced to life and 63 years.
  • February 2021: The Hawks arrested a financial adviser, Stephen van Rensburg, in Port Elizabeth for insurance fraud worth R1.9-million relating to about 15 payments. Van Rensburg turned out to be a repeat offender – he had already been incarcerated for one of two similar fraud convictions where he targeted elderly women. He was sentenced to seven years’ imprisonment for one instance and paid a fine in the second. He received 10 years on a third charge, with five years suspended for five years with stringent conditions. In the last case, Van Rensburg was released on a presidential pardon.
  • January 2021: The Hawks arrested eight people in Port Elizabeth and Welkom in relation to insurance fraud totalling R280,000 against four insurers. The investigation revealed that an insurance broker allegedly masterminded the fraud after signing up seven insurance policies with different companies between March 2014 and February 2015. When the waiting period had lapsed, the beneficiaries in the policies handed in fraudulent death claims ranging from R10,000 to R50,000. “A doctor, who has since passed away after a short illness, examined all the alleged dead people while the owner of the funeral parlour and employee allegedly provided the burial service needed on all fraudulent death claims, where other syndicate members alternated as beneficiaries and deceased persons,” said Lieutenant-Colonel Philani Nkwalase of the Hawks.

Govender says that while these high-profile cases shine the spotlight on criminality in funeral insurance and death claims, dishonest disability and critical illness claims are common, too. The total value of fraudulent and dishonest disability claims in 2021 was R195.9-million, and R128.2-million for funeral claims.

Examples of fraudulent disability claims: 

Claiming for HIV with someone else’s blood

A nurse submitted a fraudulent R1-million disability claim for HIV, alleging that she had suffered a needle stick injury at work. She supported the claim with a test result that confirmed her status as HIV positive despite antiretrovirals having been administered immediately after the alleged exposure.

The life insurance company’s forensic department found several inconsistencies and no records of HIV treatment. On further testing and questioning, the nurse admitted she had used the blood of an infected person to submit her claim. She received a five-year jail sentence, suspended for five years, and a R10,000 fine or six months in prison. 

Taking cover on a disabled person

A life insurer received an R8.7-million claim for sudden severe dementia just one month after the policy was taken out. The claim was submitted by the policyholder’s brother who had power of attorney. However, a forensic investigation revealed the policyholder had suffered a severe stroke before the policy was taken out and was unable to communicate. All signatures on the policy had been forged. BM/DM

 

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