Are pacemakers being stuck into people’s healthy hearts as an easy way to swindle insurance companies?
This is the question the long-term insurance industry must grapple with while police investigate a so-called “pacemaker scam”.
The Ombudsman for Long-term Insurance Judge Ron McLaren recently received similar complaints from two people who had each undergone an operation for the implantation of a pacemaker.
The claims by these complainants against insurers were declined by the insurers - they had illness insurance totaling R30.5m - and they, therefore, turned to the Ombudsman.
An insurer disclosed to the Office of the Ombudsman particulars of a police investigation into a so-called “pacemaker scam” which if it is established, according to the Ombudsman, will constitute fraudulent conduct by the participants.
The elaborate fraudulent scheme involves the unnecessary implantation of a pacemaker device into somebody who has significant insurance for such a claim event.
In a genuine case a pacemaker provides an electric impulse to the muscles of the heart in order to ensure that the heart beats regularly. The implantation of a pacemaker for a person who has no need, therefore, is questionable, to say the least.
In the first case, the complainant lodged complaints against Insurers X, Y and Z.
It was submitted that on 3 February 2015 an application was made to Insurer X for insurance and the following cover commenced on 1 March 2015: life cover R5.5m; illness benefit R5.5m; and disability benefit R2.75m.
In the application the complainant was described as the owner of a business who had a monthly income of R30 000. Following an operation for a pacemaker implantation during August 2015, a claim for a policy benefit was rejected by the insurer.
The insurer produced evidence that the complainant was unemployed at the time of the application for insurance. The insurer pointed out that the complainant answered in the negative (by leaving it blank) a question in the application form relating to “previous and existing assurance”.
After referring to the insurance cover which had been granted to the complainant by insurers Y and Z, with effect from March 2015, insurer X averred that the complainant was “hugely over-insured”. The complaint was dismissed by the Ombudsman on the grounds of the complainant’s “non-disclosure/misrepresentation”.
On 4 February 2015 the complainant had successfully applied to Insurer Y for the following benefits: life cover R6m; illness benefit R5m; and disability benefit R1m.
The insurer also rejected the complainant’s claim for the insured illness benefit in respect of the pacemaker implantation. The insurer relied on the incorrect employment and income information which the complainant had furnished. The insurer also raised the complainant’s false negative reply (by drawing a line through it) to a question in the application form relating to other insurance cover.
The insurer referred to the policies which had been issued more or less simultaneously by it and insurers X and Z. The complaint was, likewise, dismissed by the Ombudsman on the same grounds of the complainant’s “non-disclosure/misrepresentation”.
Insurer Z issued a policy to the complainant with effect from 30 March 2015 for the following benefits: life cover R6m and illness benefit R6m.
Insurer Z received a claim from the complainant for R1.8m under the policy for the pacemaker implantation.
This insurer indicated that it was awaiting the outcome of the criminal investigation of the matter.
The Ombudsman made a provisional ruling that the complaint could not be taken further until notification was received that the said investigation had been completed.
In the second case, complaints were also lodged against Insurers X, Y and Z.
It was submitted that on 18 December 2014, the complainant had applied for the following insurance cover from Insurer X: life cover R6m and illness benefit R5.5m.
In the application the complainant declared ownership of a business and an income of R80 000 per month.
Cover commenced on 1 January 2015. On or about 22 October 2015, the complainant underwent a pacemaker implantation and submitted a claim under the illness benefit, which the insurer rejected.
During its investigations the insurer established that the complainant’s average income for 2014 was less than R6 000, which was in stark contrast to the more than R600 000 per year declared at application stage.
The insurer pointed out that the complainant had answered in the negative (by leaving it blank) a question in the application form relating to “previous and existing assurance”.
After referring to the insurance cover which had been granted to the complainant by Insurers Y and Z, with effect from January 2015 and February 2015, respectively, Insurer X averred that the complainant was “hugely over-insured”.
The complaint against Insurer X was dismissed by the Ombudsman on the basis that the insurer established material non-disclosure by the complainant.
In the application to Insurer Y dated 18 December 2014, the complainant reflected ownership of a business; a taxable monthly income of R90 000 for the current year and a taxable monthly income of R85 000 for the previous year.
The complainant deleted a question in the application form relating to “benefit amounts of other existing insurance policies”. On the facts of this matter, the deletion conveyed a negative reply. Such a reply was false because the complainant had applied for life cover and illness benefits with Insurer X and Insurer Z.
The Insurer also averred that, during 2013 (i.e. the “previous year” envisaged in the application form) the complainant had applied for a State pension. The complaint against Insurer Y was dismissed by the Ombudsman on the grounds of the material non-disclosures by the complainant.
In the complaint against it, Insurer Z indicated that it was awaiting “the outcome of the SAPS investigation”.
The Ombudsman made a provisional ruling in this case pending the outcome of the police investigation.
A final determination was subsequently made dismissing the complaint and pointing out to the complainant that the matter could in the future be re-opened if new evidence became available.