A recent report has shown a steep increase in the number of fraudulent and dishonest long-term insurance claims identified in 2014, said the Association for Savings and Investment South Africa (ASISA). With an increase of 3 616 cases, taking the figure from 4 690 in 2013, to 8 306 in 2014.
“Had these claims gone undetected, the industry would have lost R755.2 million to dishonest policyholders and criminals in 2014,” said Peter Dempsey, the deputy CEO of ASISA.
He continued to say that despite the number of submission claims for 2014 having increased, the total number is still marginally lower than the previous year, 2013, when the value of uncovered claims sat at R794.5 million. This indicates that the dishonest claims submitted, though more, were of lower values.
“Unfortunately dishonesty and fraud does tend to be on the rise when economic conditions are harsh,” explained Dempsey.
“People are more inclined to cooperate with syndicates in return for a share of the policy proceeds. And some policyholders will either try to keep their premiums to a minimum by not disclosing all risks or submit dishonest claims with the intention of getting their hands on a policy payout that they are not entitled to.”
Dempsey warned, however, that dishonest and fraudulent claims are usually detected and that the consequences of getting caught are often severe.
Reportedly, ASISA claimed fraud figures indicate that insurers pushed fraudulent death, disability, hospital, health, and retrenchment claims. While funeral and death policies were the most common fraudulent claims in 2014.
“Dishonest policyholders risk losing their cover and fraudsters may end up doing jail time. It is also much better to be completely honest and pay the appropriate premium than to run the risk of having a claim declined when you die or become disabled,” said Dempsey.
Death and funeral claims
Dempsey went on to state the following: “The total number of irregular death and funeral claims detected in 2014 was more than three times higher than in 2013. Last year a whopping 7 360 claims were thwarted, compared to only 2 093 in 2013. However, the value of the claims in 2014 was slightly lower at R402.8 million compared to R524.6 million in 2013. “
Statistics show that fraud racked up the most cases, with a recorded 3 619, with dishonest misrepresentation and material non-disclosure coming a close second at 3 551 cases.
The report noted: Misrepresentation occurs when a policyholder deliberately provides misleading information to a life insurer. Material non-disclosure refers to the failure of policyholders to disclose important information about a medical condition or lifestyle.
Insurers have also gone on record and reported an increase in fraudulent birth certificates and death, as well as Induna (Zulu leader) reports.
These policies were then later found to have been taken out, by fraudsters, on the lives of terminally ill individuals that had no relation to them.
The report further detailed the high number of claims that were rejected in the funeral insurance sphere, because the injured died within the waiting period.
“This highlights the high level of anti-selection taking place with people only taking out cover when the need is imminent,“ added Dempsey.
Disability claims
It was stated that a total number of 524 disability claims worth R345.4 million were rejected, mainly due to misrepresentation and material non-disclosure. While only 60 claims were identified as fraudulent.
Dempsey explained: “Insurers reported an increase in cases involving policyholders misrepresenting the extent of their disability, claiming disability benefits from their employee benefit schemes and then taking on alternative employment once the payout had been received. “
Hospital cash plans
Despite the increase in claims for 2014, the hospital cash plans experienced a decrease in syndicate claims.
“While hospital cash plans had been hit particularly hard by syndicates in 2013, not a single claim involving syndicates was recorded in 2014.
“This shows that the industry’s zero tolerance approach to hospital cash plan claims involving any kind of fraud is paying off. The abuse of hospital cash plans has been a major concern for insurers and through sharing of information and working more closely with medical aid schemes, insurers have been able to identify syndicates consisting of doctors and hospital staff,” said Dempsey.
Retrenchment benefit claims
In 2014 only 31 fraudulent retrenchment benefit claims were identified.
“While this represents a remarkable drop from the 125 cases recorded in 2013, the value of these claims more than doubled from R1 million in 2013 to R2.4 million in 2014,” Dempsey noted.