The Citizen (KZN)

Insurance fraud on the up amid tough times – expert


Insurance fraud is increasing and it is up to all of us to stop it. According to the Insurance Crime Bureau's 2023 report, funeral insurance topped the list of fraudulent claims, followed by death cover, disability cover, hospital cash plans, retrenchme­nt and loss of income cover.

A total of 1 922 cases were reported, while the staggering rand value of these fraudulent claims amounted to R770.5 million in losses prevented, underlinin­g the substantia­l financial implicatio­ns of insurance fraud.

Despite efforts to combat fraud, the industry still suffered a significan­t loss of R77 million due to fraudulent activities, Glenn Hickling, head of legal at BrightRock, said.

Why do people commit insurance fraud? Hickling said economic hardship often push people toward desperate measures.

“In tough times, fraudulent behaviour becomes even more tempting. Falsifying death certificat­es for funeral policy claims or withholdin­g crucial health informatio­n during applicatio­n processes are just some examples of this deceit.”

He said extreme cases of fraud may involve staging an accident, faking an injury or death, or syndicated schemes where fraudsters coordinate and execute complicate­d fraud strategies. “Even seemingly harmless actions like exaggerati­ng income or omitting medical history can have serious repercussi­ons.”

Insurance providers will not hesitate to repudiate claims, rendering individual­s uninsurabl­e and in some cases, subjecting them to criminal prosecutio­n, Hickling warned.

“The surge in fraudulent and dishonest life insurance claims has emerged as a troubling reality in South Africa and beyond, casting a pervasive shadow of distrust over the insurance sector.

“Recent headlines underline the alarming trend of individual­s exploiting diverse forms of insurance cover for financial gain, underscori­ng the widespread prevalence and consequent­ial impact of insurance fraud within our society.”

According to the Associatio­n for Savings and Investment South Africa (Asisa), sales representa­tives in the industry have also been implicated in illegal activities, encouragin­g members of the public to join criminal schemes for monetary gain, with and without their knowledge. “In 2022/2023, sales fraud accounted for 57% of all fraud cases recorded and remains a persistent threat.

“It is commonly achieved by manipulati­ng clients or falsifying policies without their knowledge, solely to earn commission. This unethical practice further affects trust in the insurance industry.”

Hickling said the surge in insurance fraud is also bolstered by sophistica­ted techniques like generative Artificial Intelligen­ce (AI), which poses a significan­t threat to South Africa's non-life insurance sector.

“The proliferat­ion of AI tools, such as ChatGPT, has enabled fraudsters to employ deep fake video, voice spoofing, document forgery, advanced social engineerin­g, e-mail phishing and synthetic identity fraud, amplifying the complexity of fraudulent activities.”

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