Guiding consumers since 2009

Life insurers see spike in dishonest claims

By Staff Writer

Nicolette Dirk, finance writer, justmoney.co.za

Life insurance companies uncovered 5 466 fraudulent and dishonest insurance claims last year to the value of R669.9 million. Recently the Association for Savings and Investment South Africa (ASISA) stats showed that the majority of irregular claims detected involved dishonesty through misrepresentation and material non-disclosure rather than criminal intent of fraud.


The short term insurance industry is also feeling the financial brunt caused by dishonest claimants. Santam, South Africa’s largest short-term insurer, reported 79 cases of commercial crime worth R7.3million in the year to date. This included insurance fraud, forgery or falsification of documents and theft.


“It is a real concern in the South African short-term insurance industry that every year we see statistics showing a continued upward trend in the number of commercial crimes reported,” says Helen du Toit, Santam head of audit and forensics.


The cost to the industry
Insurance fraud costs the short-term insurance industry an estimated R4 billion a year. According to Santam, fraud is fast becoming a critical challenge and they are now working with the South African Police Services (SAPS), to promote awareness of fraud.


“We know that the majority of policyholders are open and honest in their claims, but practices such as ‘padding’ – when a handful of clients inflate their claim amounts, do occur. While some people think adding a few rands to their claim is harmless, it does in fact, constitute fraud,” said Attie Blaauw, head of personal lines at Santam.


Peter Dempsey, deputy CEO of ASISA, said the number of death, funeral, disability, health and hospital as well as retrenchment life insurance claims deemed dishonest increased to 4 939 in 2012 from 4 675 in 2011. The value of these claims went up from R463.5 million in 2011 to R620.1 million in 2012.


Common fraudulent claims
In short term insurance the most prevalent types of fraud include when policyholders submit a claim for an event that did not occur and inflate the claims.


“The consequences of a fraudulent claim can be dire. Those that are found guilty can face the repudiation of their entire claim, the possibility of criminal charges, and the possible cancellation of their policy. We can repudiate a claim in the event of a staged or fabricated incident, where the date or circumstances of the event has been changed or when the policyholder intentionally caused the event or loss,” said Blaauw.


According to Dempsey a number of life insurers reported cases where policyholders added children that were not their own to a funeral policy to take advantage of the free benefit for children.


“This is considered misrepresentation. Since this is a growing trend life insurers are increasingly asking policyholders to submit proof that they are either the biological parents or legal guardians of children listed on their funeral policies,” said Dempsey.


Insurance tips for consumers:

•    Understand your policy and know exactly what you are covered for.


•    Review and update your policy. Policyholders often forget to inform insurers about changed circumstances and their accumulation of new possessions. It is important to update your policy annually, to ensure that any new items are accounted for and covered. It is also important to let your insurer know what improvements or additions you have made to your home or vehicle to avoid being underinsured.


•    Check your comprehensive cover. Not all comprehensive cover is comprehensive. Common exclusions include alternate vehicle drivers and hail damage cover to your vehicle and home.


•    Get an expert on your side. Intermediaries are a good source of information and advice and can assist you with a many things from helping you update your list of insurable items to providing your insurer with your updated information and most importantly, helping you with the entire process of lodging a claim with your insurer.

 

Recent Articles

Featured Make rewards programmes work for you

Many retailers and financial service providers have introduced rewards programmes, or loyalty programmes, to retain their customers and make them feel appreciated . These programmes can help you save money, but you have to know how to make them work for you.

 

Top 5 things to consider before taking on further credit

Nowadays, the process of attaining credit has become easier and faster. Although applying for, and receiving cash on the same day may excite potential lenders, it doesn’t come without serious repercussions if you’re not wise. 

These factors will fluctuate your car insurance excess

When you take out car insurance, your monthly premium is a given. However, you may also need to pay an excess amount if you claim from your policy. But which factors may increase your excess, and how can you bring it down?

Is income protection available to everyone?

If you’re involved in an accident and you’re unable to continue working, how will you ensure that your bills are paid? One way to prepare for this is to take out income protection cover. However, can you do this if you’re a freelancer?

Deals

Get 25% off your stay at Monte Vista Boutique Hotel

Price: Available on request
When: Until 31 January 2021
Where: Montagu

Luxury Spa Package Special for R449 at Aurora

Price: R449
When: Until 31 January 2021
Where: Cape Town

Oyster and Champagne Special at Blowfish Restaurant | JustMoney

Price: R129
When: Daily
Where: Cape Town


Latest Guide

Guide to debt rehabilitation solutions