Evolving fraud detection
substantially higher from the previous year, at R524.6 million compared to R310.8 million. Dempsey however points out that the more worrying trend here was the spike in numbers that hospital cash plans have witnessed. “I think the increase in claims value is a bit of an aberration. More importantly, we find that there are certain hotspots that pop up every so often. Death and funeral policies have always attracted the most cases of fraud but last year hospital cash plans equalled their numbers for the first time,” says Dempsey.
ASISA’s members detected a total of 2 019 dishonest and fraudulent hospital cash plan claims to a value of R16.8 million, of which 1 052 were cases of fraud perpetrated by syndicates to a value of R9.2 million. By comparison, in 2012 there were only 14 cases involving syndicates. “In this instance the syndicates that the report speaks of, aren’t the typical criminal groups that the industry used to see much more of in the past. We are more referring to collaborative efforts between all the market participants, from doctors and administrative staff, down to the policyholders themselves,” Dempsey says. Misrepresentation and material non-disclosure resulted in 949 claims against hospital cash plans being rejected to a value of R7.5 million. Fraudulent documentation was detected in 18 claims worth R156 442. “The reality is that it is very difficult for individual members to defraud their hospital cash plan without help from doctors and hospital staff. Through sharing of information and working closer with medical aid schemes, insurers are identifying syndicates consisting of doctors and hospital staff and are increasingly clamping down on such claims.” That said, Dempsey notes that hospital cash plans themselves, present some easy opportunities for these groups to exploit. “This is an area in the claims statistics where we can genuinely say that there been an increase, and the reason is that these types of products are really so simple to perpetuate fraud against. The policyholder just needs to show that he was hospitalised. The proof for this comes in the form of a hospital account, which may be three weeks to a month old already. In many respects, it is like a short-term policy. If a policyholder claims and says that his insured bicycle was taken from the front lawn, for instance, there is very little one can do to prove otherwise,” he says. One of the methods that Dempsey says the industry has been seeing a lot more of, is what he terms ‘motel beds’. In these kinds of scams the policyholder is checked into the hospital in the late afternoon, spending the night and leaving shortly after having breakfast the following day. The claimants often do this for a number of consecutive days, leaving in the morning for work and returning after five. The policyholder then submits the claim two months later. “Most of the time these claimants are also on a medical aid, which pays for their hospital stay, while they receive a nice daily amount from the hospital cash plan. The industry has been working a lot closer with the Board of Healthcare Funders to fight this kind of exploitation, and over the course of the last year we’ve initiated a much closer working relationship between the medical aid schemes and our industry. The more trends we can identify and share amongst each other, the more this will, hopefully, lead to more cases being caught, and fraudsters being discouraged,” Dempsey says. “In terms of death and funeral claims I would also say that the reduction of cases also signifies an actual decrease in fraud, as opposed to an increase in fraud instances that go undetected. On this front, the industry has definitely benefited from a progression of initiatives over the last decade or so. The industry’s ability to run computer-based algorithms is improving all the time, and the data enables one to follow up on suspicious claims more effectively. This culmination is certainly making it more difficult for fraud to be perpetuated, but there will always be people who will take chances,” Dempsey imparts. The majority of disability claims in 2013 were rejected due to misrepresentation and material non-disclosure rather than fraud. A total of 447 claims worth R251 million were found to be dishonest while only six fraudulent claims worth R1.2 million were detected. Retrenchment benefits also saw a spike in numbers. According to Dempsey, this market segment recorded very few dishonest or fraudulent retrenchment benefit claims in the past. In 2012, for example, only 6 cases were recorded, while 2013 saw 125 retrenchment benefit claims worth just over R1 million rejected due to misrepresentation, material nondisclosure and fraud. Dempsey adds, however, that the majority of claims submitted to life companies are legitimate and therefore honoured. The beneficiaries of individual policyholders who had death and disability cover in place received benefit payments worth R26.7 billion from the life insurance industry in 2013. “Life companies paid 98.9 per cent of all claims made against fully underwritten life policies in 2013. Only 1.1 per cent of death benefit claims were declined.” Dempsey ends on a positive note, pointing out that the majority of irregular death and funeral claims detected in 2013 involved dishonesty through misrepresentation and material non-disclosure rather than the criminal intent of fraud. In total 1 504 claims worth R478 million were found to have involved either misrepresentation or material non-disclosure. Looking forward, Dempsey tells RISKSA that ASISA’s next reports will already start coming out in January, with the collective investment schemes statistics for 2014. “It will be reporting on all the inflows and outflows, number of funds registered and de-registered, and growth in the industry. Later in February we will also be releasing the life insurance statistics for 2014,” he concludes.