Insurance scammers do ghoulish trade in bodies

Surging deaths due to Covid-19 are giving rise to a particularly grim crime with syndicates trading in bodies to make bogus death claims, according to the organisation representing the country’s finance industry.

The Association for Savings and Investment SA (Asisa), whose members look after about R6-trillion and include some of the country’s largest life insurers, disclosed this as it released data showing a 12% jump in fraudulent and dishonest claims in 2020.

Fraudulent funeral claims showed the biggest increase as mortuaries overwhelmed by Covid-19 deaths make it easier for criminal syndicates to obtain dead bodies for the purposes of lodging illicit claims.

“Since funeral insurance policies do not require blood tests and medical examinations and are designed to pay out quickly and without hassle when an insured family member dies, criminals and dishonest individuals most commonly try their luck in this space,” says Megan Govender, convener of the Asisa forensics standing committee.

Insurers reported 3,186 cases of fraudulent and dishonest claims valued at R587.3m in 2020, up from 2,837 and R537.1m the year before.

Funeral insurance was the worst affected with a total of 2,282 fraudulent or dishonest claims in 2020 valued at R80.8m, up from 1,783 dodgy claims worth R54.2m in 2019.

The fraud heaps more pressure on an industry struggling with the effects of the Covid-19 outbreak and various lockdowns, which in 2020 sent the economy to its biggest contraction in a century.

Last week, Old Mutual said it set aside another R2bn to cover potential death claims, the latest insurer to do so amid a third wave of infections and a stuttering vaccination drive.

Govender says the increase is not surprising given the tough economic conditions as a result of the pandemic, which makes it more tempting for unscrupulous policyholders and criminal syndicates to attempt to score sizeable insurance payouts using underhanded methods.

Govender says that while funeral insurance has always

been a soft target for scams, the pandemic has worsened this trend as the wave of job losses drives more people towards desperation and criminality.

Not only have the almost 80,000 recorded deaths linked to Covid-19 — excess death data indicates the death toll is much higher — made it easier for fraudsters to source dead bodies through illicit means for the purposes of lodging fraudulent claims, but families are also going to extraordinary lengths to obtain payouts.

Asisa says that since most life insurers impose a waiting period of six to 12 months before policyholders become eligible for payouts in the event of deaths due to natural causes, some have gone so far as to orchestrate false deaths.

Govender says the waiting periods are imposed to prevent policyholders who are already aware of an underlying condition from taking out policies at the last minute so their dependants can benefit from the ensuing payout. This has resulted in cases where desperate families have tried to make it appear as if policyholders had died from unnatural causes.

Asisa says in one case, the body of a family member was collected from the mortuary before the death was registered and then purposefully placed on a road where it could be hit by a vehicle. The family then submitted a claim for a false hit-andrun accident.

Even more disturbing is the practice of buying dead bodies from corrupt mortuary employees, who sell the cadavers to syndicates for the purposes of submitting false claims on policies taken out months earlier.

“If funeral cover is taken out on someone who does not exist by submitting fraudulent documentation, the criminal will have to commit a further crime by either buying a dead body or murdering someone to enable them to claim,” says Govender.

“Buying an unclaimed dead body is usually the easier option,” she said.

Asisa says criminal syndicates are also targeting drug addicts and alcoholics from impoverished communities by making false job offers to obtain their personal and banking details, which are used to make fraudulent funeral policy applications. Govender says in one case a syndicate using this method tried to murder the victim, who managed to escape, prompting the criminals to buy a dead body on which to base the fraudulent claim.

Though life insurers are often accused of trying to avoid paying out claims, Govender says the numbers tell a different story. The life industry recorded 434,216 legitimate death claims in 2020, of which more than half (266,321) were for funeral policies, resulting in claims and benefit payments of R522.7bn.

While fraudulent and dishonest claims seem like a drop in the ocean when compared with honest claims paid, Govender says life insurers must remain vigilant to counter underhanded claims to prevent untenable claims rates, which would result in higher premiums for honest policyholders.

“The chances of being caught are extremely high and the consequence is likely to be a lengthy prison sentence,” she says.

ASISA SAYS CRIMINAL SYNDICATES ARE ALSO TARGETING DRUG ADDICTS AND ALCOHOLICS FROM IMPOVERISHED COMMUNITIES