A contract of good faith

When a client accepts comprehensive motor vehicle insurance cover with an insurer, it is generally accepted that the contract is concluded in good faith, and that both parties’ intentions are honest.

In some instances, underwriters do not require that the vehicle be inspected pre-inception of the cover as the underwriter accepts the exact principle of good faith. This acceptance includes that the insured vehicle does in fact exist, is drivable, is roadworthy and with no major pre-existing unrepaired damage.

Not playing a fair game

In the last few years, Censeo has uncovered a number of occurrences where policyholders did not act in good faith, with several incidences of syndicates illegally claiming payouts from unsuspecting underwriters.

These syndicates normally consist of a group of people who do not only finance the entire process, but also take the largest share of the settlements of these claims for accident-damaged vehicles. Only a small percentage of the settlement is paid to the insured.

The modus operandi starts-off with the purchase of accident damaged vehicles, mostly vehicles already written-off or declared uneconomical to repair. They target various organizations and private individuals in the process. The acquired vehicles are mostly still licensed and registered. In most instances, insurers have already paid out settlement amounts on these vehicles on legitimate claims submitted by previous owners a few months earlier.

An elaborate motive

Vehicles are placed on cover usually with two different insurers as to prevent the creation of red flags or suspicion. Cover is normally taken with a different insurer to the previous carrier insuring the vehicle. Both drivers pay a monthly installment for premiums between two to six months prior to staging accidents and submitting claims.

The drivers always concur and confirm the description of the incident, which occurs in isolated areas where the collision occurred. They would corroborate each other’s story of bright lights causing them to lose control, swerving for the proverbial little black dog and there are usually no other witnesses.

To add to the mix, agreements are made with unscrupulous tow operators who would arrive at the accident scene after an alleged call out. These tow operators are in fact part of the syndicate and in most instances are assisted in the tow of the wrecks to the staged scene as part of the setup in order create credence to the incident.

The insurer pays the tow operator for the so-called legitimate tow. Miraculously, there are usually no injuries to the driver or just minor scrapes and scratches. We have even had instances where they have gone as far as to create an incident with circumstances to submit a claim whilst the vehicles have not even moved an inch from the tow yard.

The truth surfaces

Auditors have been appointed on several of these matters and have successfully managed to prevent the payout of a number of fraudulent claims. There were non-complicit insured’s used in some instances who were very unaware that insurance had been taken out on their names. Complicit insured’s and drivers generally do not avail themselves for the assessor interview. We have also seen an increase in the withdrawal of these claims once auditors have been appointed on the matter.

With pre-assessment processes, the proper paper trails and reliable sources in the field, auditors are assisted in successfully uncovering and preventing the payout of these fraudulent claims by various insurers.

The South African Insurance Crime Bureau, in conjunction with project teams from the South African Police Organized Crime Units, have also had several successes in the arrest, prosecutions and convictions of some syndicate members. The reality is that, once one syndicate is closed down, three others surface with a new modus operandi targeting different unsuspecting insurers all over again.