Crime rampant across insurance disciplines

The lengths that criminals go to in their quest to steal money from banks, insurers and other financial institutions is staggering. Nowadays, criminal syndicates use a variety of tools to get the job done including cross-border transactions, document forging, identity theft, insiders and money mules, to name a few.

“Retired Durban doctor Eric van der Veen, 85, was convicted of two counts of fraud for signing death certificates which were then used in multimillion-rand insurance claims,” leads the Insurance Crime Bureau (ICB) introduction to the article. The doctor had signed two death certificates without physically examining the bodies in return for a measly R500,00 each. The doctor entered a plea bargain that was sanctioned by both of the impacted life insurance brands, Discovery Life and Momentum, and was sentenced to eight years imprisonment, wholly suspended for five years. 

Times Live lists three co-accused in this matter as Emmanuel Ponnan; Merlen Munusamy; and the director of Isikhova Funeral Services, Sifiso Gebala. None of the co-accused had been sentenced at the time of publication, and one can only hope that the court is successful in punishing the apparent masterminds of the attempted fraud. Unfortunately, as is often the case in these matters, the smallest component in the criminal plot is hardest hit: the individual who pocketed R1 000,00 has faced criminal sanction while those who chased after R36 million in fraudulent claims remain ‘free and clear’ for now. 

This news item coincided with the writer’s ‘deep dive’ into the ICB 2023 Annual Report which was released late last year. The ICB works closely with its insurance industry members and various local and international enforcement agencies to stamp out insurance crime. It boasts countless successes in the 15-years since its inception and has saved the local insurance sector billions of rand. Although not a fan of the ‘running total’ reporting methodology, this writer is impressed by the R3.75 billion in total financial returns achieved by the ICB from inception until 30 June 2023. 

Reuniting vehicles with consumers, insurers

These ‘returns’ were broken down as R3 billion in savings for insurance members; around R394 million in savings for non-members; and R398 million in recoveries for uninsured consumers. Other headline numbers include R390 million worth of vehicles returned to un-insured individuals; R1.23 billion worth of vehicles returned to insurers from pounds; R77 million in cloned vehicles returned to members; and R898 million in life industry savings. PS, all vehicle totals were calculated based on around 40% of market value. 

“A large part of our success in this journey has been establishing a respectable brand which is recognised for excellence and meaningful returns within the insurance industry; following humble beginnings back in 2008, we now represent 34 insurance companies in the non-life, life and funeral insurance sectors,” wrote Garth De Klerk, CEO of the ICB, in his introduction to the report. “Our objective includes identifying, investigating and facilitating the prosecution and conviction of perpetrators committing fraud and related crimes within South Africa”. He added that the life-to-date return on investment (ROI), being a representation of the combined efforts of the fraud combatting community, stood at around nine times each rand invested in the ICB. 

COO of the ICB, Hugo Van Zyl, thanked the organisation’s members for their support, before commenting on the strong relationships that exist between the ICB and a long list of stakeholders, including the South African Police Services (SAPS); National Prosecuting Authority (NPA); Road Traffic Management Corporation (RTMC); Financial Intelligence Centre (FIC); Special Investigation Unit (SIU); and numerous others. Referring to the 2022-23 period, Van Zyl said: “the operations team has set new records in combatting organised insurance fraud and related crimes in SA; the ICB is known not only for addressing organised insurance fraud and crime, but for addressing other crimes that have a huge impact on society…” 

Cross-border fraud on the rise

The ICB 2023 Annual Reports delves into some of the frauds that the ICB and its members have encountered in the latest 12-months. Under the life insurance banner, the ICB illustrated the global reach of today’s fraudsters, describing how an Australia-based insurer was conned into paying out two fraudulent death claims into a Vietnam-based bank account, with the monies subsequently funnelled back into South Africa. “An investigation revealed that all the documents [used to support the life insurance claims] were fraudulent, and that the alleged deaths were not reported with the Department of Home Affairs,” the ICB writes. It turns out the life insureds were still alive and living in the Western Cape. 

Domestically, following enquiries from various ICB members, a scheme was uncovered in which a single doctor was responsible for the certification of a number of deceased persons. Again, quoting from the ICB report: “An investigation revealed that these claims were for ‘paper children’ or non-existent persons who died and were buried without the death being reported to the Department of Home Affairs for them to be removed from national population register”. According to the ICB, they identified more than 200 charges leading back to a single doctor. The matter is being investigated by various government and enforcement agencies. 

Turning to the short-term insurance sector, the ICB reported that “major breakthroughs were made in addressing organised vehicle crime syndicates through multi-disciplinary projects; over a three-week period, three gangs of ‘blue light’ hijackers were arrested with multiple vehicles, firearms and other crucial evidence recovered”. These arrests also led to the recovery of goods stolen during truck hijackings. Some common-sense interventions aimed at reducing vehicle-related insurance crime and fraud include making an ICB enquiry “an integral part of claims validation”. The information from these enquiries can be collated and monitored to deliver workable intelligence for ongoing crime fighting efforts. 

Clients, brokers a first line of defence

FAnews asked De Klerk how insurance brokers and their clients could assist in combatting insurance crime and fraud. “See something, say something,” he said. “Clients and brokers are a first line of defence and can be of huge assistance in discovering criminal syndicates”. De Klerk added that the promise of ‘easy financial gain’ was a clear warning sign that something might be amiss and warned that instances of insurance crime and fraud were much higher during difficult economic times. 

FAnews readers active in the insurance and investment industries must remain vigilant and stay informed about the techniques that insurance crime syndicates use. “Stolen identities were extensively used by a syndicate focusing on premium refunds,” the ICB writes. As an example, one syndicate would buy insurance for high value building contents, personal items and / or vehicles and then adjust the policy to generate a premium refund, which refund was paid into a money mule’s bank account. 

“When fraud is perpetrated within the insurance sector the illicit funds move through the banking system, and as a combined industry we have to start following the money and closing the loop,” De Klerk said. “This will make a big difference in combatting syndicates operating in the industry”. In closing, he said the ICB would concentrate on delivering focused, strategic growth during 2024 and increase its relevance across the financial services sector. 

Writer’s thoughts:
In discussion with FAnews, the CEO of the Insurance Crime Bureau called on readers to be proactive in protecting yourselves and your loved ones from fraud. Have you or any of your clients come up against examples of insurance crime or fraud recently? And were you successful in reporting same? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.