South Africans are taking advantage of power cuts to commit fraud
Santam recently released its Insurance Barometer report for the 2022/23 financial year ending in the first half of 2023, which highlighted a rise in power surge-related claims fraud.
Load shedding is coming at a serious personal cost to South Africans, with power surges causing appliances to be damaged or destroyed. The sudden power cuts can cause voltage fluctuations and surges, damaging sensitive electronic components in your appliances.
Load shedding has resulted in a spike in power surge-related claims regarding homes and businesses. The damage ranges from domestic appliances, such as TVs, fridges, and geysers, to industrial machinery.
Santam’s report showed that Personal Lines power surge claims increased by 37% over the last 12 months, and the value of power surge-related claims paid out nearly doubled for the second year running.
Additionally, a recent TrendER/infoQuest survey showed that close to three out of four South Africans had at least one home appliance damaged or destroyed due to load shedding. This marks a major increase from the 57% recorded in the 2022 study.
The loss of fridge contents has also increased from 50% in 2022 to 67% in 2023. Gate motor destruction or damage also increased from 15% to 27%. With load shedding also making security cameras ineffective, a rise in burglary/home invasions has also been detected – up to 16% from 11%.
Santum’s report also showed the main challenges faced by commercial and corporate respondents due to load shedding and power surges included loss of productivity (43%), increased costs of doing business (34%), and economic loss (23%), with actual damage to assets at 14%.
As a result of the out-of-control claims, Santam noted that it has experienced an element of fraud in this claim category, as evidenced by the insureds’ claims behaviour. Essentially, some insureds were claiming regularly and were found guilty of claims padding (inflation of the value of the claim).
Rising cost of living to blame
South Africans are struggling to cope with the high cost of living, with many turning to debt to make ends meet, and many are committing insurance fraud as an easy way to raise some cash.
This is according to the CEO of the Insurance Crime Bureau, Garth de Klerk, who said that the group had noted an uptick in insurance fraud.
Speaking with eNCA, De Klerk said the cost of living crisis in the country is pushing people to commit fraud that they consider a victimless crime to free up some cash.
He explained while several insurance companies are seeing an uptick in claims padding, they are also seeing a concerning increase in incidence staging.
“This is quite prevalent in claims for home invasions, where individuals are claiming that their homes were broken into, listing various items of value that were stolen when, in fact, the robbery never took place,” said De Klerk.
De Klerk said that as the economic conditions have worsened in South Africa, insurers are seeing these types of claims fraud increase across the income brackets, from poor households right through to high-income earners – although they are more prevalent among those that don’t have a safety net in terms of disposable income.
Read: Private security warns of kidnapping surge in South Africa
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