Evolv­ing fraud de­tec­tion

RISKSA Magazine - - Long Term -

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.

Built-in vul­ner­a­bil­ity

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.

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