South Africa’s life insurers have seen a 34% rise in publicity to fraudulent and dishonest insurance coverage claims in 2021 compared to 2020, with detected life insurance coverage fraud circumstances rising to 4 287 from 3 186 in 2020.
In accordance with the Affiliation for Financial savings and Funding South Africa (Asisa) the nation’s life insurers detected 1 101 extra fraudulent and dishonest claims in 2021, amounting to R787.6 million, up from the R587.3 million reported in 2020.
Regardless of the numerous enhance in detected fraudulent claims, convenor of the Asisa Forensics Standing Committee Megan Govender tells Moneyweb that the majority of those fraudulent claims have been rejected and didn’t end in monetary loss to insurers.
“In assessing these claims, most of them have been really repudiated however in that determine, you’ll discover that there have been claims that have been paid,” he says.
The provinces of KwaZulu-Natal, the Jap Cape and Gauteng accounted for the majority of the detected fraudulent life insurance coverage claims reported within the nation in 2021, accounting for 998, 972 and 682 claims respectively.
Threat premium rises
Though the worth of the fraudulent circumstances detected in 2021 could appear immaterial, particularly within the context of the insurance coverage trade paying out R608 billion in claims and profit funds – the very best quantity ever paid in a single yr – Asisa warns that this upward pattern ought to proceed , trustworthy coverage holders could bear the brunt of this prison behaviour.
Govender says trustworthy coverage holders could find yourself paying greater premiums due to the elevated danger positioned on insurers.
“The price of insurance coverage is predicated on particular charges, and it is primarily based on danger, so the extra fraudulent claims we entertain it signifies that the larger the chance is to the enterprise,” he says.
“So, what occurs is that it’s a must to reprice your product to account for fraudulent claims so the extra fraudulent claims that you simply pay, the extra danger you might be putting on your enterprise.”
Govender says the rise in fraudulent claims additionally impacts the pace at which insurers could make funds to beneficiaries as insurers are compelled to dedicate extra time to verifying claims. This has a larger affect on funeral cowl claimants as they typically must entry funds quickly after lodging a declare.
“If we’re receiving a number of claims and extra claims that need to undergo a validation course of then there’s a downstream impact in that customer support is impacted … and it causes numerous stress.”
Learn: Fraudulent insurance coverage claims aren’t well worth the danger
Funeral claims highest
Funeral insurance coverage claims accounted for the majority of the fraudulent claims reported in 2021, with 3,268 circumstances price R128.2 million detected.
Most of those claims have been labeled as misrepresentation or materials non-disclosure circumstances. That is the place policyholders fail to reveal or misrepresent vital data to an insurer that would have a fabric affect on the phrases of the coverage.
Regardless of funeral claims accounting for probably the most detected claims, fraudulent dying claims accounted for the very best in worth in 2021.
In accordance with Asisa the 452 fraudulent dying claims reported within the interval have been price R460.4 million, greater than the R264.3 million reported in 2020.
Though the worth of fraudulent incapacity claims reported for 2021 (R195.9 million) was considerably lower than that reported in 2020 (R233.6 million) the class noticed an uptick in detected circumstances to 352, from 325 in 2020.
Impression of Covid-19 restrictions
With the appearance of the Covid-19 pandemic within the final two years and the unprecedent dying fee due to the pandemic, South African life insurers have been significantly hard-hit by excessive dying declare charges. The latest flooding in KwaZulu-Natal, which is estimated to have taken over 400 lives, can be anticipated to have an effect.
Learn: Larger life insurance coverage premiums for the unvaccinated on the playing cards
Govender says in an announcement that some Covid-19 restrictions carried out in 2020 made it laborious for sure safeguards and conventional verification strategies to be carried out, giving rise to an upshoot in fraudulent claims.
“In 2020, the prolonged COVID-19 lockdown prevented our forensic investigators from bodily going out into the sector, which performs an vital half in uncovering syndicate operations and taking a more in-depth have a look at different prison actions similar to suspicious unnatural deaths,” he says.
“Nevertheless, by 2021 our subject investigations have been largely again to regular, and the success fee is mirrored in these statistics.”
Conviction charges stay low
Regardless of the rise in detected fraudulent claims circumstances within the insurance coverage trade, by way of convictions criminals the numbers are fairly low, says Govender.
“We do be sure that the place we have prima facie proof to show the fraud we register the case with the South African Police Service [SAPS],” he says, including that the wheels of justice can nonetheless take a very long time to show.
“However the member corporations are working laborious with [the SAPS] to make sure that a few of our larger circumstances get prioritized and that the investigating officers do what they should do to deliver the perpetrators to e-book.”