Dying for money
On the night of 7 December 2006 Avhatakali Netshisaulu, the son of City Press editor Mathata Tsedu, burned to death in the boot of his motor vehicle. It was a shocking death, made worse by the subsequent arrest of his widow, Mulalo Sivhidzo for her alleged involvement in the murder.
While there is no suggestion of life insurance fraud in this case, the same cannot be said in the death of mining magnate Brett Kebble.
Accused of Kebble's murder, Glen Agliotti suggests he was asked to assist in a suicide and make it look like murder. This would ensure Kebble's insurance policies would pay out. It will probably be years before the truth is known.
These extreme cases offer an insight into the lengths people will go for financial reward. Does this mean that insurance fraud is on the rise?
The numbers seldom lie!
The latest numbers released by the Life Offices' Association (LOA) indicate that long-term insurance fraud is on the decline. The value of claims rejected due to insurance fraud were down from R175.2 million for the first half of 2005 to R99.5 million for the first six months of 2006.
By far the largest contributor to reported cases of rejection in the first half of 2006 is material non-disclosure, with a total of 682 cases rejected by insurers. As an example, Lerato Mametse, communications manager at the (LOA) sites this case:
"One of our member companies reported a case of material non-disclosure, where life cover worth R1.1-million was taken out on the life of a person who was on a ventilator and in intensive care at the time of [the] application. Since this was not disclosed to the life insurance company, the claim was rejected as the insurance company would not have insured the person if all the facts had been known."
Fraudulent documents to claim death benefits
Another category of insurance fraud involves the use of fraudulently obtained documents to obtain the insurance payout. Instances of this type of fraud accounted for R10.1 million across 372 cases. Mametse sites another case to demonstrate:
"The accused father and daughter had taken out a personal accident and funeral policy on a person they alleged to be the daughter's husband, while he was, in fact, one of their tenants. When this person died three months later of natural causes excluded in terms of a waiting period imposed by the policy, they fabricated information to show that the insured had died of an unnatural cause. But since they used death documents for a pauper killed during a burglary under investigation by police, the life company discovered that the claim was fraudulent."
In this case the accused were sentenced to a seven year jail sentence.
Apply strict assessment procedures
While the levels of life insurance fraud were down when comparing first-half 2006 to 2005, there is no room for complacency. It would be terrible to see a repeat of the 40% spike in rejected claims when comparing 2004 to 2005.
Everyone involved in the insurance industry should exercise proper diligence in their underwriting and claims assessment procedures. This practice should reduce the number of dishonest claims, prevent the subsidisation of dishonest claims by honest policy holders and hopefully reduce the amount of premiums payable by all insured in the long run.
Editors thought:
There will always be someone trying beat the system. The best solution to the problem is to continue to improve both claims underwriting and claims assessment practices.
