The Association for Savings and Investment South Africa (Asisa) has published its life insurance claim statistics for 2021, showing a significant increase in fraudulent and dishonest claims.
South African life insurers detected 4,287 fraudulent and dishonest claims worth R787.6 million across all lines of risk business in 2021. This is a significant increase from 2020, when 3,186 cases of fraudulent and dishonest claims to a value of R587.3 million were uncovered.
The data shows that funeral insurance once again attracted the highest incidence of fraud and dishonesty, followed by death cover, disability cover, hospital cash plans and retrenchment benefit cover.
Megan Govender, convenor of the Asisa forensics standing committee, attributes the surge in exposed fraudulent and dishonest claims to the deployment of sophisticated detection mechanisms by the long-term insurance industry to stop fraud and dishonesty.
He said the R787.6 million in fraudulent and dishonest claims detected in 2021 may seem like a negligible amount when compared to the R608 billion in claims and benefit payments made to honest policyholders and their beneficiaries in 2021 – the highest ever paid in a single year.
However, if left unchecked, fraud and dishonesty would have the biggest impact on honest policyholders who would ultimately have to pay higher premiums to make up for untenable claims rates, he said.
He explained that the long-term insurance industry is therefore constantly innovating preventative measures to combat insurance fraud, including the use of artificial intelligence, data sharing for early detection of trends and an increased focus on field investigations.
“In 2020, the lengthy Covid-19 lockdown prevented our forensic investigators from physically going out into the field, which plays an important part in uncovering syndicate operations and taking a closer look at other criminal activities such as suspicious unnatural deaths,” said Govender. “However, by 2021 our field investigations were largely back to normal, and the success rate is reflected in these statistics.”
Govender warned those contemplating a crime to gain access to an insurance pay-out that the chances of being caught are extremely high with the consequence most likely a lengthy prison sentence or a hefty fine.
He pointed to the recent ‘Rosemary Ndlovu case’, which resulted in a sentence of six life imprisonment terms for the former police officer who had several family members murdered so that she could benefit from the funeral insurance pay-out.
Similarly, a pastor and his wife in the Western Cape received lengthy prison sentences last year for taking out life insurance policies on church members with the intention of having them murdered by a hitman for the death benefits.
Govender said while these high-profile cases have focused the spotlight on criminality in the funeral insurance and death claims space, dishonest disability (including critical illness) claims are also not uncommon.
While the case numbers are typically lower, the value of fraudulent and dishonest disability claims thwarted in 2021 exceeds the value of funeral insurance claims by a significant margin. The total value of fraudulent and dishonest disability claims detected in 2021 was R195.9 million, compared to R128.2 million for funeral claims.
Asisa highlighted two notable cases that were dealt with last year.
Claiming for HIV with someone else’s blood
A disability claim was submitted by a nurse under her severe illness benefit, alleging that she had suffered a needle stick injury at work which resulted in her being exposed to and infected with HIV.
She supported the claim with a test result that confirmed her status as HIV positive even though antiretrovirals had been administered immediately after the alleged exposure.
The life insurance company’s forensic department investigated the claim and found several inconsistencies and no records of the client being treated for HIV.
The nurse was requested to undergo further testing with an independent laboratory. This resulted in her admitting that she was not HIV positive and that she had used the blood of an infected person to submit her claim.
The life insurer reported the fraudulent claim to the police and the nurse received a five-year jail sentence, suspended for five years, and a R10,000 fine or six months imprisonment. The investigation resulted in the prevention of a R1 million fraudulent claim pay-out.
Taking cover on an already disabled person
An Asisa member received a claim for sudden severe dementia against a disability and severe illness policy only one month after the policy had been taken out.
The claim was submitted by the policyholder’s brother who had a power of attorney.
A forensic investigation revealed that the policyholder had suffered a severe stroke before the policy was taken out and was unable to communicate. All signatures on the policy had been forged. The claim was declined, preventing fraud worth R8.7 million.