Bodies bought, rented to scam insurance companies
Furthermore, in at least 156 of the claims, beneficiaries were found to have caused the deaths of the policyholders.
The report further revealed that KwaZulu-Natal had the highest number of fraudulent and dishonest insurance claims.
According to the association, life insurers rejected 1915 funeral claims worth R176.4million last year, of which 1127 were found to involve fraudulent documentation.
Another 156 fraudulent claims showed that in some cases, beneficiaries of the policy had played a part in the death of the policyholder.
“Funeral policies do not require blood tests and medical examination and are designed to pay out quickly and without hassle when an insured family member dies.
“Unfortunately, this makes it tempting for criminals and dishonest individuals to take out funeral cover for people who do not exist, with the intention of later submitting claims using death certificates issued for dead bodies rented or bought for the purpose of committing fraud. The renting or buying of dead bodies was a common modus operandi,” said Asisa convenor, Donovan Herman.
These bodies are often unclaimed and left to lie in state mortuaries for weeks without families coming forward.
According to Herman, they were sold or rented out by scam artists. Herman said that last year, long-term insurers declined 698 irregular death claims worth R417.3m.
“Fraud was detected in 481 cases, while seven cases involved syndicate fraud and another 15 dishonesty by financial advisers. A further 195 claims were declined due to misrepresentation or material non-disclosure.”
He said there had, however, been a noticeable decline in cases involving misrepresentation and non-disclosure from 316 in 2017 to 195 last year.
He said policy applicants were compelled by law to honestly disclose all information likely to influence the judgement of the insurer when determining the appropriate policy terms and premiums.
The chairperson of the Funeral Industry Reformed Association, Johan Rousseau, said there was no regulatory body in the industry.
He said that despite attempts by government departments, there was no organisation delegated to oversee the process when a person died and how death certificates were issued.
“Someone can supply a fake death certificate and there is no controlled process. We have submitted our proposals to the government on how this issue can be regulated and checked, but have yet to hear back from them,” he said.
National Funeral Practitioners Association of SA secretary-general Nkosentsha Shezi condemned those trying to defraud the system.
“We have noted the results released, and whoever is caught making these fraudulent claims must face the full might of the law. We do not condone these fraudulent activities,” he said.
The report also noted that misrepresentation and material non-disclosure by policyholders was by far the biggest reason for disability claims being declined last year.
Asisa said a total of 519 hospital cash plan claims were rejected, amounting to R32m.
KZN recorded 33% of fake insurance claims followed by the Eastern Cape with 18%, Gauteng with 17% and Western Cape 9%.