Stopping insurance fraud in its tracks

Santam handed fraudulent claims of R11 million over to SAPS last year

Santam is getting really, really serious about insurance fraud.

The South African short-term insurance leader follows up on every single tip-off it receives about insurance fraud and on every claim that seems dubious and over-inflated. As a result of this determined vigilance, it received 418 tip-offs and reported 58 insurance related fraud cases last year to SAPS representing more than R11 million. The R11 million represented ‘the tip of the iceberg’, says Helen du Toit, head of audit and forensic services at Santam and was money that went straight back to providing good and proper value for money insurance to honest clients.

A nation-wide research project polling brokers and consumer attitudes to insurance fraud reveals a number of fascinating insights.

Most people who do not report insurance fraud stay quiet because they think this is a victimless crime and they would rather not get involved in the affairs of others. This, says Du Toit, in spite of the fact that most people interviewed considered themselves to be of strong moral and ethical character.

“We also found that commercial and private clients committed insurance fraud for different reasons. Businesses tend to commit fraud to improve a stultified cash flow or to make improvements to an asset. Private consumers, on the other hand, commit fraud out of greed and because they want to get back as much as they can from the premiums they have paid the insurer.”

More worryingly, however, the survey found that people imagined ‘everyone’ defrauded their insurance company at one or other time and that people tend to commit fraud to ‘get back’ at insurance companies that they imagine do not treat them with respect.

When researchers asked people why they did not commit insurance fraud themselves, the most common responses were that they either thought to do so would be dishonest or that they were frightened of being caught out by the insurance company. “Interestingly,” says Du Toit, “very few people cited fear of premium increase or lack of opportunity as reasons for not committing fraud.”

Insurance fraud has severe consequences... and not only for the people who are caught trying to defraud their insurers. The more fraud occurs, the higher premiums become for everyone in the insurance pool. It’s difficult to give a wholly accurate figure, but without insurance fraud, premiums would be in the region of 15-20 percent lower across the board.

Du Toit concedes that the impact of fraud on the industry is not completely understood. However, she estimates that between R2 and R4 billion is lost to fraud by the larger industry each year. In the US, insurance fraud is recognised as the second most common commercial crime after tax evasion and costs Americans more than US$96 billion in premium increases each year alone.

“There is a direct link between the cost of insurance premiums, and the number of people who get away with fraudulent or inflated claims,” she says. “If fraud is not controlled at least, or eradicated at best, insurance will become unaffordable for most of us.”

Santam’s forensic services department works tirelessly to root fraud out. Cases of insurance fraud are handed over to the SAPS for investigation and criminal charges are brought against perpetrators.

“Santam is proud of how well it stands by clients. We do everything we can to pay claims, pay them quickly and make claims processes as accessible and simple as possible for our client. We would never find ways to abscond from our responsibility to pay client claims. But we do act. And we act decisively against fraudsters. We will continue to do so and we will continue working hard to find fresh ways of uncovering fraud. We are determined to protect the interests of our honest and responsible clients and give them best value for money against their investment in insurance.”