In recent years reports showed that fraudulent insurance claims such as funeral, disability, and death claims have been on the rise. In 2011 these reports were confirmed by South African life insurers.
According to statistics that were released by ASIN (Association for Savings and Investment South Africa) fraudulent claims that totalled 26 million in 2010, had increased to a staggering 131,7 million in 2011. Most of these claims involved syndicate activity making use of falsified fraudulent documents. Fraudulent claims have been reported across different insurance sectors including business insurance and car insurance.
The deputy CEO of ASIN has stated that although a certain percentage of these claims had been paid prior to fraud being detected, the majority of these fraudulent claims were exposed by insurers before being paid.
A common misconception amongst criminals is that insurance companies are easy targets; this however has proven to be untrue due to highly developed fraud detection mechanisms. Insurers are now able to detect fraudulent claims in the early stages of the claim, thus preventing the fraudulent claim from being approved.
According to the deputy CEO of ASIN, although fraud claims have drastically increased by a whopping 105.7 million from 2010 to 2011, dishonesty related claims have in fact decreased with a massive 142 million from 2010 to 2011. He further stated that this decrease is for the most part due to a decline in misrepresentation as well as material non-disclosures. Following is the definitions of misrepresentation and material non-disclosure:
Misrepresentation: In the event that a policy holder intentionally gives false or misleading information to an insurance company i.e. in the event of a divorce the ex-spouse does not report the divorce and when the estranged spouse dies a claim is pursued.
Material non-disclosure: If a policy holder intentionally withholds important information regarding a medical or even a lifestyle condition that is vital to the assessment process for a life insurance policy i.e. if a policy holder doesn’t mention that he or she has had cancer or that he / she participates in extreme sports.
Due to the ever increasing amount of fraudulent claims scores of insurers have put their foot down and taken a stand of zero tolerance against these criminal activities. ASIN Deputy CEO has warned that claims found to be relating to fraud will merit a full criminal investigation and quite possibly jail time.