Category Fraud/Crime

A win-win for insurer and insured

18 March 2009 Gareth Stokes

The newspapers are littered with the human cost of crime. But have you ever stopped to think about the financial implications of living in the ‘wild wild west’ of the emerging world? Forget for a moment the damage done as thousands of skilled professionals seek safer pastures and focus on the actual cost of fraud, trafficking and violent crimes that blight our beautiful land. According to Charles Goredema – an expert at the Institute for Security Studies – ‘big ticket’ crimes ‘cost’ the country more than R110.5bn each year.

In a Sapa article Goredema estimates the ‘profits’ from financial crimes at between R80bn and R90bn each year, followed by drug trafficking and smuggling of goods (R10bn) and predatory crimes like robbery, house breaking and theft ( R500m). Do we have your attention? This information is of importance to the short-term insurance industry because vehicle hi-jacking, vehicle theft and home and commercial robberies account for a huge slice of the short-term claims paid each year. Stamping out crime is a win-win for insurer and insured – it creates the dream insurance scenario where premiums go down while underwriting margins go up.

Insurers pay out billions each year

It doesn’t take rocket science to work out that insurance companies shoulder much of the country’s crime burden. Santam’s claims and loss-adjusting expenses in the 2008 year amounted to R9.422bn (of which R1.415 was recovered from re-insurance contracts). The bulk (67%) of the group’s R14.179bn gross premium for the year falls in the Motor and Property categories – where household and vehicle crime occurs. Another large local insurer, Mutual & Federal, reports R5.220bn claims paid net of re-insurance in the latest year.

Although neither insurer mentions the impact of crime in their latest report they still do their part to combat it. Short-term insurers, through the South African Insurance Association, make regular contributions to Business Against Crime South Africa (BACSA). According to SAIA “The short-term insurance industry is adversely impacted by the unacceptably high levels of vehicle crime and insurance fraud – and we are concerned about the increases in house and business robberies.” They make repeated donations to BACSA, particularly for use in projects to reduce vehicle crimes. These initiatives have helped to reduce certain crimes in this category by 30% since 2002.

Earlier this year BACSA commented on President Kgalema Motlanthe’s opening address to Parliament. They bemoaned the “low probability of a criminal being investigated, arrested, charged, prosecuted and sentenced as evidenced by the 2007/8 national statistics, which showed that only 13.4% of all reported crimes, 12.6% of contact crimes and 7.3% of property crimes resulted in a conviction.” And the latest SAIA/BACSA initiative hopes to improve the situation. They funded the training of 500 detectives from the Gauteng SAPS. Commenting at the graduation ceremony held in Johannesburg recently, SAIA notes: “When we were approached by BACSA in 2007, we readily saw the merits and a wonderful opportunity to support the capacity-building within our SAPS Detective Services.”

More action – less electioneering

If only politicians could take the same ‘hands on’ approach. They’ve been having a field day with the crime topic as they canvas support for the country’s fourth democratic elections. We’re puzzled by the ANC’s policy of getting tough on corruption while including the likes of Winnie Madzikizela-Mandela in the fifth slot on its election list – not to mention the party’s presidential candidate. DA leader Helen Zille has been shouting them down for months now. “The problem with the ANC is that it doesn’t have the political will or leadership to stamp out crime,” she says. Their focus is on protecting the party’s top brass by shutting the Scorpions and throwing the South African Police Services and National Prosecuting Authority into disarray. She promises that the DA “will catch the criminals and then prosecute, convict and punish them” when they win the Western Cape…

That’s great for Cape Town; but what must the rest of us do? The average Joe doesn’t receive R1m per month for a security entourage. Instead we have to rely on an understaffed, poorly resourced and demoralised police force for protection. And government’s failure to take strong action on National Police Commissioner Jackie Selebi and the reluctance to appoint a new police chief in his absence inspire little confidence. Until government gets tough on crime we’re going to have to continue paying the so-called security tax – hiring armed response companies and private security guards to provide the protection we expect from the state!

Editor’s thoughts:
The best way to tackle a massive problem is to break it down into manageable pieces. What South Africa needs is a government focused on combating crime rather than creating smoke screens to hide it! Do you think the current government is doing enough to combat violent crime? Add your comments below, or send them to


Added by JW, 19 Mar 2009
There is an e-mail going around with figures on the cost of crime, the replacement value and the subsequent VAT income for SARS… makes you think, will government ever do something about crime, but that is another topic for discussion.
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Added by CB, 19 Mar 2009
Will keep this short, as I can go on about politics. We need many more Helen Zille’s in our country. Why waste money on the TV advert, ‘Arrive Alive’ – it only applies to ‘the man in the street.’ The ANC are above this campaign as with McBride and the judge who rode into a residents’ boundary wall. He is VERY CLEARLY drunk as his eyes are VERY glazed. Any goose can see that, so who are they fooling? See, he will be let off those charges as he is linked to the ANC. What if he kills someone, next time, while drunk? I’ll give you one guess, yes, you are right, he will get let off. This country is a criminal’s paradise. They do violent crime because the punishment does not fit the crime. Never mind, Jacob Zuma, horror of all horrors, what a shame for this country when he, unfortunately is elected president with a criminal cloud hanging around in the background. I won’t discuss Winnie, many people say she has blood on her hands.
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Added by GH, 19 Mar 2009
Many people would say that the government is not only doing too little to combat crime, but are actually contributing to it. The problem needs to be tackled holistically ie starting off with proper discipline in schools and universities, parent example, proper policing on the roads and by the police force, a zero tolerance with petty crime which if unchecked, graduates into serious crime, and appropriate punishment for crimes committed. Many would also argue that capital punishment for murder and rape should be re-instated. I would have difficulty in arguing against such an assertion. Then pragmatic economic principles need to be applied, as opposed to political ideology, to generate more jobs and increase efficiency. We need a leader of the stature of men like Nelson Mandela or Jan Smuts to have the courage to do what is best for the country and all it’s peoples. I see chaos and mayhem in the years ahead as the economy slows and the less privileged become desperate. One needs to have a plan B should this scenario eventuate as I don’t see world markets recovering for at least 4 or 5 years.
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Added by DS, 19 Mar 2009
Once again, great article. Please don’t get me started on those low life scum who are loosely referred to as politicians. They’re the scourge of the earth.
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Added by AF, 19 Mar 2009
I just read this morning in, I think 'News 24' regarding Helen Zilla's report on crime under the present government and her remedy thereof. 'Big Ticket' crimes total R110.5 billion each year. Present government has many many criminals in its ranks. You can calculate at 14% vat on all the property that has to be replaced. The government is making a fortune on crime. I just heard that the next possible president has just had his fraud and corruption charges dropped. I don't think Insurance companies will readily drop their premiums. They also need the money to pay their large contingent of overstaffed and underqualified personnel. So.. at present it is a win-win for Government and criminals.
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Added by Platjie, 18 Mar 2009
The government will not do enough to combat crime.It is the biggest job creator in the land at the moment for which the government do not have to pay. For every criminal there are 2 people (jobs) making security fences etc,and security guards etc.Who pays for this? Why will the gov do anything about crime.
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Added by Gregory, 18 Mar 2009
The government is not doing enough. Furthermore they obstruct the administration of justice by closing down the Scopions, which was perfoming well in combating organised crime. Scandal like the travelgate shows clearly that the government itself is committing crime.
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Added by "Same old same old", 18 Mar 2009
I f only the focus could be diverted form feathering nests and lining pockets. Then and only then could the real issues facing this country be addressed. It is easy to spend millions of taxpayers money on security for those who are in denial of the magnitude of crime in our country.
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Added by FedUP, 18 Mar 2009
And who said" Crime doesn't pay? in South Africa not only does it pay but it seems to pay well!!!! Look again at who actually pays insurance on there cars and homes and businesses. When calculating ratio only 20% of SA population actually take insurance, they get no tax relief on those premiums or on the additional costs to pay for security. Gov get your tax, they tax staff at those companies they tax those companies and do they tax the criminal?? NO sorry we pay the criminals a R 1m a month to protect them from other criminals.LOL got to enjoy the seriously macarb twist in this scenario.
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Added by Elna, 18 Mar 2009
Crime and exactly crime and the cost of it to the consumer is what drives more and more people out of South Africa. If is not just unsafe to live here it is also very expensive - every theft/robbery/hi-jack/burglary cost the consumer in excesses and additional top-up costs if the value of the item to be replaced is higher than the amount insured and it also costs the Insurer in replacements and assessor fees and each and every time VAT is earned by the government on these replacements- crime sure pays but not those who pay taxes and premiums! They pay for security beyond reason and because they have no other choice, if not, tomorrow it could be them on the front page of the newspaper!
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