Fraudulent claims costing consumers R3 billion a year
Closer cooperation between insurance companies and authorities needed to stem tide
Local insurance industry bodies need to work together with authorities to identify and prosecute perpetrators of fraudulent claims, which are costing South African consumers an estimated R3 billion a year.
This is according to Jonathan Holden, Executive: Operations at Lion of Africa Insurance, who says that new organisations such as the Crime Bureau of South Africa - which make use of highly sophisticated technology to track fraudulent activities in the industry - are going a long way to identifying and eliminating illegal activities. Holden urges insurance companies to join initiatives such as the Crime Bureau in order to see a potential reduction in insurance premium increases.
A recent report by Standard Bank estimated that the rate of short-term insurance fraud in South Africa accounts for approximately 15% of premium costs, which equates to roughly R3 billion every year. "With potential insurance premium increases on the horizon, the industry at large needs to come together, share information and act fast in order to safeguard and protect consumers financially," says Holden.
Established in 2008, the Crime Bureau of South Africa currently consists of 10 member companies, among others, Lion of Africa Insurance, Santam, Mutual & Federal, Hollard, 1st tier, Outsurance, Momentum, ABSA, Regent and Miway.
According to Holden, the bureau collects claims from all member insurance companies and works very closely with the South African Police Service (SAPS), the Hawks, the South African Revenue Service (SARS) and the justice system to identify areas of fraudulent claims. Holden cites three cases of fraudulent activity amounting to approximately R580 000 that were recently discovered by the bureau. There are also a further 16 cases, worth approximately R36 million in total, currently under investigation.
Holden says that affiliation with the bureau has enabled Lion of Africa Insurance to cross check claims with recent police reports from roads blocks and spot checks in order to assess the credibility of certain vehicle claims. For example, we can track whether or not a driver was under the influence of alcohol at the time of an accident by cross-referencing the claim with data captured by the police from road blocks in the area. Based on this, the insurance company can take the decision to restrict the policy or raise the premiums.
Another proactive initiative by the Crime Bureau led to the recovery of approximately 350 vehicles from two separate police pounds in Kwazulu-Natal.
Holden says that the value and magnitude of false claims discovered to date is evidence enough that industry co-operation needs to occur in order to reduce unnecessary premium increases in the future. It has also exposed trends and common practice among criminals, which has allowed industry players to create a map of fraudulent activity.
He says that it is very difficult to calculate how much money is actually lost due to insurance fraud, because the offense is designed to be undetectable. "The current figures are only based on those incidences that were discovered and do not take into account the cases that are successfully perpetrated. The actual figure could be much higher and insurance companies need to take responsibility on behalf of consumers to reduce the effects of fraudsters on premiums."
The Crime Bureau currently focuses on the short-term insurance industry, but there are plans to extend the scope to the local banking and medical aid sectors.
