Category Fraud/Crime

Broker fraud lessens in self regulating climate

24 January 2007 Santam / Lange Strategic Communications

Increased pressure on insurance brokers in the wake of financial services legislation is expected to impact positively in reducing fraud in the brokerage environment, as these service providers are forced to up their game.

"When fraud does occur, it is often industry players themselves who are fingering the culprits in order to protect the sector as a whole", says Jerry Chetty, Manager of Forensic Services at Santam.

"Generally brokers are sensitive to the perceptions of the public and are therefore constantly trying to reinforce the value of their service, which essentially takes the paperwork and hassle away from the client."

Chetty says the majority of brokers are aware that fraud is a criminal offence and that if it is committed it will result in a loss of their livelihood.

"However, there are still a number of isolated cases where an initial oversight or an honest mistake such as neglecting to add an item to a clients' policy or incorrectly insuring the specified item in terms of correct amounts or cover dates, occurs.

"In the process of rectifying these innocent oversights the broker would phone the call centre or effect the changes after the loss had occurred- thus committing fraud.

"We suggest that when a broker realizes these honest oversights, he or she contacts the necessary area manager and explain the situation.

"Ultimately all brokers should be cognisant of their roles and responsibilities in advising clients, but also of their service offering to clients," he says.

Chetty adds, "Fortunately with new controls like the Financial Advisory and Intermediary Services Act (FAIS) and easy access to the industry ombudsman, the financial advisory environment has tighter controls and is increasingly policed, making it less appealing and more difficult to commit fraud."

Santam operates a confidential fraud hotline through which any kind of fraud, whether client or broker-related, can be reported 24 hours a day.


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