In January we reported on the long-term insurance industry's fraudulent claims statistics for the first half of 2006.
Today we take a look at the full year numbers, released in a press statement by the Life Offices' Association (LOA) on Wednesday. These numbers reveal a number of startling facts about the lengths that individual policyholders will go to in an attempt to obtain fraudulent benefits.
The good news is that the full year numbers confirm the trend established in the half year results. Long-term insurance fraud appears to be on the decline. The number of reported cases is the lowest on record since the LOA began keeping statistics in 2003. A no nonsense approach from the large life insurance companies has led to savings or R242 million in 2006 through the rejection of 2, 844 fraudulent claims.
Gerhard Joubert, CEO of the LOA stressed the importance of clamping down on fraudulent claims: "Given half a chance, crime and dishonesty would substantially increase the claims experience of life companies. If allowed, such a trend would force companies to push up premiums."
Saving R1 billion over four years
A quick look at the numbers confirms that the life insurance industrys tight focus on fraudulent activities has resulted in savings in excess of R1 billion since 2003. Refused claims amounted to R247 million in 2003, R214 million in 2004, spiked to R347 million in 2005 and fell by 30% to R242 million last year.
The categories with the most reported cases were misrepresentation, material non-disclosure and criminal intent.
We can place the rand value of refused claims in perspective when considering the total paid claims in the same period. The R242 million in refused claims is a drop in the ocean, or a mere 1.27% of the R19 billion insurance claims paid by the industry in 2006.
Policyholder risks all for undeserved windfall
Joubert provided examples of some extreme cases of criminal intent reported in the 2006 year. One of these involved a policyholder who feigned the symptoms of a stroke in an attempt to institute a disability claim.
"He did this so well that he even fooled a top neurologist into believing that he had indeed suffered a stroke. But the life company involved in his third claim became suspicious because of his young age and because a brain-scan showed no signs of bleeding. Surveillance subsequently conducted by a private investigator confirmed that there was absolutely nothing wrong with this policyholder," said Joubert.
The policyholder is now spending time in jail
Another policyholder deliberately pushed his hand into a lawnmower blade in an attempt to cash in on a functional impairment policy. Joubert said that "the disability claim would have been successful, had a family member not tipped off the life company that the policyholder had stuck his hand in the lawn mower blade deliberately. He had hoped for a lump sum payout, which he needed as start-up capital for a new business venture."
Continued vigilance will further reduce claims
According to Joubert, a "heightened awareness and ever increasing vigilance on the part of claims assessors and forensic divisions are the likely reasons for this successful reduction in fraud." While the annual report confirms that the number of refused fraudulent claims is on the decline it remains for the industry to monitor the situation carefully.
The same characteristics should ensure that that the industry is successful in its quest to reduce fraudulent claims in the future too.
Editor's thoughts:
The two examples of fraudulent claims included in this newsletter are almost unbelievable. Do you have any examples of similar refused insurance claims? Send your incident to gareth@fanews.co.za.
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