While many South Africans would never think of submitting a fraudulent insurance claim, insurers have experienced a dramatic rise in the submission of false information for financial gain.
Car insurance fraud is currently ranked among the top ten crimes in South Africa. Often taken lightly, the consequences are, however, incredibly serious.
According to the crime statistics for 2018/19 released by the South Africa Police Service and Stats SA earlier this month, commercial crime has seen the biggest increase of 14.4% compared to last year.
As car insurance fraud is considered a white-collar crime, it falls into the commercial crime category – the same category as corruption, extortion, money laundering, embezzlement, internet fraud, forgery and tax evasion.
Vera Nagtegaal, the executive head of online comparison site Hippo.co.za, said financial circumstances can lead people to be tempted to embellish claims for their benefit.
“The insurance industry is receiving a lot more inflated or false claims for high value pay outs when a vehicle was actually worth less, as well as incidents where accidents are staged.”
Nagtegaal said it has been estimated that up to 32% of all insurance claims submitted in any year could be fraudulent.
“The consequences for those found guilty of car insurance fraud is that their claims will be repudiated, they will become uninsurable, and they face the risk of prosecution.”
Earlier this year, a man who claimed that his car was hijacked was handed a seven-year sentence in July 2019, after an investigation found that his claim in October 2016 had been false. He managed to defraud his insurer of R300,000.
Nagtegaal defines the different kinds of car insurance fraud as follows:
- Fabricated Car Insurance Claims are considered to be hard fraud. This is usually planned by a claimant who wishes to receive a full policy pay out. Some people go to great lengths to deliberately damage their vehicles or report them stolen after they have for instance sold them in a neighbouring country.
- Exaggerated Car Insurance Claims are classified as soft fraud. This occurs when the claim is legitimate, but the loss is padded. As an example, the car was perhaps stolen, but the claimant indicated that valuable items were in the boot as well.
- Fronting is when a parent indicates that they are the main driver when taking out insurance for their child to get a lower premium. Staged accident scams and lying on your insurance application forms also constitute fraud.
Nagtegaal advised consumers to not even think about submitting a fraudulent claim with their insurer. “False claims will force your insurer to cancel your policy and insurance providers won’t be prepared to provide you with cover. The wise thing to do is to be honest and accurate with your details when submitting them to your insurer,” she said.