Life insurance fraud is on the rise, and insurance companies are being forced to be extra vigilant.
According to the Association for Savings and Investment South Africa, there has been a massive increase in fraudulent death claims in South Africa, with experts saying that fraud costs the combined insurance industry billions of rand a year.
The statistics show that in 2017, claims to the value of R1.13 billion were made against life insurers. In total, 2111 fraudulent death claims were reported, compared with only 444 in the previous year.
One example of this kind of fraudulent claim is from an investigation by the Insurance Crime Bureau last year, where a child of 13 apparently died under strange circumstances.
An official death certificate was issued, and an undertaker confirmed she had been buried. However, she was later discovered to be alive, and an investigation uncovered that she was part of an insurance fraud scheme to receive multiple payouts from different insurance companies where the child was covered under various policies. The SA Police Service are investigating to determine which child was, in fact, buried.
“Insurance companies have rules and procedures in place to protect themselves from these kinds of fraudulent claims,” says Vera Nagtegaal, executive head of Hippo.co.za. She says the rule of thumb when you take out a life insurance policy is to “overshare”.
“If there is any information that relates to your health or lifestyle, disclose it, even if you think it isn’t relevant. This may mean that your premiums are increased, but it will help to ensure that you or your family are better protected against your claim being repudiated as a result of non-disclosure,” she says.
It is possible you could accidentally omit to reveal relevant information to your insurer. Nagtegaal says this could affect your terms of cover, or might mean your claim may be rejected, but you probably won’t be charged with fraud.
“However, in the case of clear intention to defraud an insurance company, as in the example of the girl who had not actually died, the insurer can lay criminal charges.”
She adds that it is likely that if you have submitted an intentionally fraudulent claim, your policy will be cancelled. “This not only affects your relationship with your current insurer. Your claims record may be shared with other insurers, reducing your chances of being able to take out insurance in the future.”
According to the Global Economic Crime and Fraud Survey (2018) published by PricewaterhouseCoopers (PwC), South Africa’s rate of reported economic crime is 77%, compared with the global average of 49%.
Fraud committed by consumers is the second most reported economic crime, and 19% of organisations have had to spend between twice and 10 times as much on investigations as the original amount lost to economic crime.
But the report indicated that companies are getting better at dealing with and preventing fraud.
“Organisations are beginning to shed their denial complex regarding the many blind spots they have in identifying fraud,” notes PwC.