Insurance fraud is often not seen as a ‘crime’

However, falsely claiming on your insurance — no matter how small — is fraud and never advisable.
The purpose of insurance is, to put the client in the same position that they were in before their loss — though not a better position.

Increase in insurance fraud can be attributed to the following:
· Decline in economic conditions
· Stock market fluctuations
· Increase in personal debt

There are 3 main types of fraudulent insurance claims:
1. Fabricated Insurance Claims: -
· E.g. the owner of a vehicle parks his already damaged car in the path of a storm so branches and hail damage the car, he then claims in order to get the car repaired.
2. A valid loss due to Insurance Fraud: -
· E.g. a claim for an injury under a personal accident insurance policy where there is no dispute injury is covered, but doctor fails to sign accompanying report so insured forges doctors signature on the claim.
3. Exaggerated Insurance Claims: -
· E.g. an insured house is burgled after which he claims for various additional items which were lost before the burglary took place or which he never owned in the first place.

Insurance companies have had no way of determining whether clients have:
· previously committed insurance fraud,
· whether they are insured with more than one company and are enriching themselves by filing several claims for one loss, or
· whether they are in the habit of company-swapping to escape being found out.
As a result, premiums are pushed higher and higher and honest clients end up funding the dishonest ones.

Fraud will not be reduced by quick fix mechanisms. Legislation alone cannot be relied upon as an effective preventive strategy against fraud. Improved technology to ensure early detection, joint operations and information sharing are more effective than courts simply handing down tougher sentences.

Identifying and curbing fraud on such a large scale requires a heavy-duty analytic solution. There is a need for analytical applications - that can take data from disparate sources and present an overview of all the patterns and relationships hidden in the data to assist in discovering and highlighting trends, potential new business areas and fraudulent transactions quickly and efficiently.

Intelligent searching technology must be able to ensure candidates are found despite the unavoidable or deliberate variation and error in name, address and other identity data.

It is often essential that the search technology be able to search and match data from any country and potentially in any character set.

According to the South African Insurance Association (SAIA), worldwide insurance fraud adds about 15 percent to the cost of insurance premiums. If this estimate is applied to the local insurance industry, it is costing R3 billion a year.

To combat fraud and to get accurate statistics on the extent of the problem in South Africa, the SAIA, the Life Offices' Association (LOA) and the South African Financial Services Intermediaries Association launched the Insurance Fraudline.

The insurance industry also has a data-sharing system in place aimed at combating fraudulent claims.

By Fathima Parker, Assistant Manager for Fraud Investigations and Dispute Services at Ernst & Young