Buying dead bodies and other insurance scams hit South Africa

South African life insurers have reported a 12% increase in fraudulent and dishonest claims across all lines of business in 2020.

The 2020 fraudulent and dishonest claims statistics, released this week by the Association for Savings and Investment South Africa (Asisa), show that 2020 saw 3,186 cases of fraudulent and dishonest claims to a value of R587.3 million were recorded.

This compares to 2,837 fraudulent and dishonest claims in 2019 valued at R537.1 million.

Megan Govender, convenor of the Asisa forensics standing committee, said the increase in fraudulent and dishonest claims is not surprising since tough economic conditions make it more tempting for dishonest policyholders and syndicates to try their luck in the hope of scoring sizeable insurance pay-outs.

While funeral insurance has always been seen as a soft target for fraudsters, the Covid-19 pandemic has worsened.

Desperation due to job losses is driving more people to resort to crime. At the same time, the pandemic has also resulted in a significant increase in deaths, which makes it easier to source dead bodies from flooded mortuaries for fraudulent claims, he said.

“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.”

Some of the examples of fraud involving funeral policies:


  • Buying dead bodies

Govender said fraud in the funeral insurance space often involves mortuary employees who sell dead bodies to syndicates who then use these bodies to claim against policies that were fraudulently taken out some months earlier.

He said there have been several incidents in recent months that illustrate just how far some people will go to access a funeral policy pay-out illegally.

“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.

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


  • The ‘hit and run’ crime

Funeral policies impose a waiting period of between six and 12 months on deaths due to natural causes to prevent people from only taking out a policy once they are sick and knowing that they will probably die.

Govender said he has come across cases where families were so desperate for pay-outs from funeral policies that they orchestrated unnatural deaths after their family members had died from natural causes within the waiting period.

One family collected the body from the mortuary before they registered the death. The body was then purposefully placed in the road where it could be hit by a car. The family reported a hit and run accident and submitted a claim.


  • Exploiting addicts from poor communities

Govender said the life industry has picked up on a syndicate that targets drug addicts and alcoholics from impoverished communities. Under the pretext of a job offer, it obtains their personal details, including banking details.

These details are then used to submit fraudulent funeral policy applications.

Govender said in one case, the syndicate then tried to murder the victim. The victim managed to escape, and the syndicate then moved to plan B of buying a dead body and submitting a claim.

The claim was marked suspicious by the life company’s claims department and submitted to the forensic department for further investigation.

Investigators found that the person whose life was insured was, in fact, still alive. Govender said the same syndicate has also been responsible for other fraud cases and suspicious deaths.


Protecting honest policyholders

Govender said that while fraudulent and dishonest claims seem like a drop in the ocean compared to honest claims paid, life insurers must vigorously counter fraudulent and dishonest claims to prevent them from leading to untenable claims rates that would ultimately result in higher costs premiums for honest policyholders.

While life insurers are frequently accused of avoiding paying claims, the numbers tell a different story, he said.

Policyholders and beneficiaries received claims and benefit payments worth R522.7 billion from South African life insurers in 2020.

The life industry recorded 434,216 legitimate death claims in 2020, of which more than half were for funeral policies (266,321). Last year the industry found 2,282 claims against funeral policies to be fraudulent or dishonest.

Govender warns those contemplating a dishonest or fraudulent claim that life insurers have implemented extremely sophisticated fraud detection mechanisms using artificial intelligence and data.

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


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Buying dead bodies and other insurance scams hit South Africa