It is estimated that fraud is costing the South African short-term insurance industry a staggering R3bn a year, with local consumers ultimately footing the bill through higher insurance premiums.
This is according to Fiona Pickersgill, Claims Manager at CIB Insurance Administrators, who says that rising insurance fraud is being driven by factors such as the exaggeration of legitimate claims, deliberate misinterpretation of facts and manipulation of the claims process, in order to acquire financial rewards from scenarios where there has actually been no tangible loss.
“Insurance fraud arises as a result of the many incorrect perceptions with regards to insurance claims. For example, many consumers incorrectly believe that when claiming for damaged or stolen goods, the insurer is either not likely to pay out enough to cover the item, or will attempt to reduce the claim as far as possible. This is however not the case, and if the trend of insurance fraud escalates further, consumers might be paying increased premiums in future, in order for insurance companies to afford the growing number of fraudulent claims.”
Pickersgill explains that fraud is ultimately categorised by soft or hard fraud. “Hard fraud involves a claim where the incident never actually occurred, whereas soft fraud represents a valid incident, but with a distortion of material facts leading to financial gain.”
She says that in an already fragile financial market, insurance fraud is not only costing the economy, it is affecting the law abiding citizen who is already battling to afford his or her premium. “A concerning factor is the precarious mind set which has emerged among consumers, thinking that that they are entitled to inflate insurance claims due to the premiums they pay.”
The South African Insurance Crime Bureau (SAICB), together with The South African Fraud Prevention Service (SAFPS), SAPS and various other strategic partners have implemented several crime fighting measures to combat insurance fraud in South Africa, specifically focusing on trends and syndicates.
Pickersgill advises that consumers report incidences of fraud by calling their insurance companies directly or by calling the Insurance Fraud Line on 0860 00 25 26 or sending an email to insurance@fraudline.co.za.
“The Insurance Fraud Line is managed by the SAICB and continuously provides the short-term insurance industry, as well as financial brokers, with investigative reports which are followed-upon a monthly basis in an on-going attempt to obliterate fraud, professional fraudsters and organised criminal gangs.
“It is important to note is that there are other hard hitting penalties associated with being convicted of fraud. These will result in the offender having difficulty in obtaining further insurance, as well as incurring affected credit history ratings, which may potentially prevent individuals from obtaining employment in certain industries,” concludes Pickersgill.
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