SA sees escalation in funeral insurance fraud

South African life insurers have reported a 12% improve in fraudulent claims throughout all traces of threat enterprise in 2020, in accordance with fraudulent and dishonest claims statistics launched this week by the Affiliation for Financial savings and Funding South Africa (Asisa).

Insurers reported 3 186 instances of fraudulent and dishonest claims to the worth of R587.3 million for the 12 months, up from 2 837 such claims amounting to R537.1 million in 2019.

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It was additionally revealed that 31% of all fraudulent and dishonest claims had been detected in KwaZulu-Natal, adopted by the Jap Cape and Gauteng at 16% and 15% respectively.

Funeral cowl an ‘simple goal’

Asisa reveals that the very best incidence of fraud and dishonesty came about inside the funeral insurance coverage area, the place over 2 000 claims to the worth of R80.8 million had been discovered to be dishonest.

“Since funeral insurance coverage insurance policies don’t require blood exams and medical examinations and are designed to pay out shortly and with out trouble when an insured member of the family dies, criminals and dishonest people mostly attempt their luck on this area,” says Megan Govender, convenor of the Asisa Forensics Standing Committee.

He believes that whereas funeral insurance coverage has at all times been considered a simple goal by fraudsters, the rise in fraudulent and dishonest claims doesn’t come as a shock given the nation’s robust financial local weather even previous to the Covid-19 pandemic.

He says the pandemic – which [has induced] important losses within the job market – has worsened the state of affairs and made it “extra tempting for dishonest policyholders and syndicates to attempt their luck within the hope of scoring sizeable insurance coverage payouts”.

The problem of offering proof of demise 

Among the surprising incidents of fraud involving funeral insurance policies embody “shopping for lifeless our bodies”, which includes mortuary staff promoting lifeless our bodies to syndicates, which then use these our bodies to say towards insurance policies that had been fraudulently taken out some months prior.

Govender factors out that not solely has desperation pushed extra folks to resort to crime, however with the pandemic having led to a rise in deaths, it has change into simpler to for fraudsters to supply lifeless our bodies for his or her dodgy claims from overwhelmed mortuaries.

“If funeral cowl is taken out on somebody who doesn’t exist by submitting fraudulent documentation, the prison must commit an extra crime by both shopping for a lifeless physique or murdering somebody to allow them to say.

“Shopping for an unclaimed lifeless physique is normally the better choice,” he says.

Govender has come throughout instances the place households are so determined for payouts from funeral insurance policies that an unnatural demise is orchestrated after a member of the family has died from pure causes inside the ready interval.

‘Untenable’ … and dangerous

He says whereas fraudulent and dishonest claims look like a drop within the ocean in comparison with trustworthy claims paid, he urges life insurers to vigorously counter fraudulent and dishonest claims to stop them from resulting in untenable claims charges that may finally end in increased premiums for trustworthy policyholders.

Learn: FSCA slams high premium increases on funeral policies

Govender factors out that whereas life insurers are steadily accused of making an attempt to keep away from paying claims, the numbers truly inform a special story.

However to guard trustworthy policyholders, Asisa warns these contemplating a dishonest or fraudulent declare that life insurers have put in place “extraordinarily subtle fraud detection mechanisms” utilizing synthetic intelligence and information.

“The probabilities of being caught are extraordinarily excessive and the consequence is prone to be a prolonged jail sentence,” says Govender.

Palesa Mofokeng is a Moneyweb intern.

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