Escalating Insurance Fraud set to Hit Consumers Hard

With consumers and businesses coming under increased cash flow pressure from higher interest rates and inflation, insurance companies are noticing a marked increase in the number of fraudulent insurance claim submissions.

Adam Samie (pictured), CEO of Lion of Africa Insurance says that in the UK, with 1 in 10 claims being fraudulent, fraud costs the industry and thus consumers BP1.4bn per annum adding BP40 annually to the cost of insurance premiums. In South Africa, the ratio of fraudulent claims is higher costing the short term insurance industry alone close on 2 billion Rand per annum.

“In the current economic climate any further increases in fraudulent claims will present even more unfortunate and negative predicaments for honest consumers who will ultimately be bearing the brunt as a result of higher premiums implemented by insurers in an effort to recoup their losses” says Samie.

Samie who also chairs the South African Insurance Association (SAIA) has expressed an urgent need for industry experts and professionals to address this issue through the recently developed Insurance Crime Bureau (ICB), an independent industry body aimed at curbing and preventing insurance related crime in South Africa.

“With the likelihood of insurance premium increases already being high, the industry at large needs to come together, share information and act fast in order to safeguard and protect our consumers” adds Samie.

Noor Osman, Lion of Africa representative to the board of directors of the South African Insurance Crime Bureau says “Lion of Africa have played a pivotal role in spearheading the establishment of the ICB, where research that we have reviewed has shown the successful implementation of fraud prevention units abroad in the UK and Switzerland, where we are confident that our local efforts will show equally good results.”

According to Samie, fraudsters are not only violating the rights of the consumer but are corrupting the basic communal principle governing insurance practices, whereby the losses of the few are made good (indemnified) through the contributions of the many. Thus criminals who are caught by the ICB will be reported to the relevant law enforcement authorities and prosecuted.

“The purpose of insurance is to create structures where the masses have access to sound recourse to protect their wealth and livelihoods against the consequences of unforeseen events. These criminals are defying this basic truism by creating a corrupt situation where both the insurer and the consumer, and thus society at large will suffer harm” says Samie.

Samie adds that with the current economic pressures already having inflicted considerable difficulty onto the consumer, the ICB will be paramount in curbing any additional financial burden on the consumer as a result of higher insurance premiums.

“The ICB forms one of the many crime fighting units in the country and we believe that this initiative will play a role in reducing the economic cost of crime to the country” says Samie.