of criminals reveals the first five-year review of claim fraud
statistics in South Africa. Between 2003 and 2007 the country’s
life insurers identified 20,992 claim frauds ranging from identity
theft to material non-disclosure and in the process prevented a
total loss of ZAR1.33 billion ($185 million).
Undertaken by industry body the Life Offices’ Association (LOA),
the review was based on data collated by the LOA in an effort to
assist member companies in reducing fraudulent claims through the
sharing of information about fraud trends and patterns, said the
LOA’s CEO Gerhard Joubert.
Among the more sophisticated claim frauds are those perpetrated by
syndicates involving identity theft. Joubert explained that all
that is required is a real person’s name and identity number. If
that person has an existing policy with an insurer the syndicate
submits a fraudulent death claim without the person’s
If the person is uninsured the syndicate takes out a life or
funeral policy on the person’s life and pays the required premiums
for the waiting period of the policy.
Once the waiting period is over, the syndicate will produce
a body with a fraudulent death certificate and claim the death or
Joubert added syndicates usually receive tip-offs from state
mortuary staff or private undertakers who are on their payroll when
an unknown body is not identified by next of kin in a reasonable
time or when a badly mutilated body arrives. A fraudulent death
certificate is then issued and a claim is made.
Highlighting the pitfalls of micro-insurance, syndicates mainly
operate in low income markets in the provinces of Kwa Zulu Natal
and Eastern Cape.
“Not only is it much more difficult for life companies to verify
and investigate claims in these areas, but in addition funeral and
entry-level policy sales volumes are also the highest in these
provinces,” said Joubert.
He continued that claims fraud is not always committed by
syndicates. A social worker in Eastern Cape, for example,
identified people in her community who were suffering from Aids.
She managed to take out 75 funeral policies on the lives of these
people. The life company involved found out after she had already
claimed successfully against 34 of these policies.
Despite criminal ingenuity Joubert believes the big insurers’
change from reactive to proactive fraud prevention measures is
beginning to pay off.
“The core of this [pro-active] method is electronic data mining,
whereby all client and intermediary data is scanned to such an
extent that discrepancies pointing towards fraud are noticed
immediately,” said Joubert.
He added that insurers also share fraud statistics and information
with each other with the aim of detecting new trends and syndicate
activity as early as possible.
Progress, believes Joubert, is evident in a decline in the number
of identified fraud claims which fell from a peak of 8,660 in 2006
to 1,512 in 2007.
However, the value of detected fraud fell by a far lower 19.7
percent during this period while the average value per case
increased by 360 percent to ZAR184,391.