Insurers step up vigilance against fake claims

7/22/2010 12:40:03 PM

SURE KAMHUNGA

Financial Services Editor

Life insurance companies last year foiled fraudulent claims for more than R740m, which an industry official said showed the extent to which the recession had turned honest people into criminals to survive.

In some of the worst cases cited by Peter Dempsey, deputy CEO of the Association for Savings and Investments SA, a fraudulent claimant shot a thumb off so he could claim a disability benefit, while syndicates have taken bodies from funeral parlours to use when claiming death benefits.

International and local syndicates were involved. Their methods included stealing death certificates, medical records and identity documents to make fraudulent claims.

“We find that if you go back probably six to seven years, there has been a reduction in syndicate involvement,” Mr Dempsey said yesterday, but there were still signs of syndicate activity — “probably just 5% to 6% of the cases”.

Last year, life insurers detected 4514 attempts by policyholders and beneficiaries to access benefits through fraudulent or dishonest means. Had these been paid out, the industry would have lost R745,4m.

In 2008, the industry stopped 1382 fraudulent and dishonest claims worth R375,9m.

The number and value of claims last year was significantly higher because the industry had improved on gathering information and on sharing such figures.

“While we certainly believe that this was a contributing factor last year, the industry has also significantly improved its fraud detection measures and reporting mechanisms over the years,” he said.

“It is worrying because every time you pay out a fraudulent claim, that is spread across the policyholders fund and eventually impacts on premiums,” he told Business Day.

“But it shows that people are driven to desperation by the economic conditions and the extent to which they can go to make fraudulent claims. I know of a chef who shot his thumb off and claimed it was a botched hijacking, but the forensic investigators got suspicious and he was not paid.”

KwaZulu-Natal had the highest number of fraudulent and dishonest claims submitted, representing 40% of the total, followed by Gauteng (22%) and the Eastern Cape (15%).

Mr Dempsey said the death and funeral insurance category experienced the highest number of fraudulent and dishonest claims last year, with life companies reporting 3266 cases worth R364,9m.

There were 813 cases of misrepresentation and material non-disclosure detected in the disability claims category — worth R360,8m. In addition, 22 cases involving the submission of fraudulent papers, with a value of R9,9m, were reported.

Life insurers had caught on to policyholders who admitted themselves to hospital without a valid medical condition in order to claim from their hospital cash plans.

Last year, 404 such claims worth R9,6m were detected, said Mr Dempsey, again citing the case of a policyholder who had six hospital cash plans with different life companies, to all of which he had submitted fraudulent documents claiming to have been in hospital.

kamhungas@bdfm.co.za