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The rand value of fraudulent insurance claims soars

12 October 2007 Gareth Stokes

The latest report on insurance fraud makes for some interesting reading. At first glance, one is struck by the massive reduction in the number of fraudulent cases. This has fallen from 1, 651 uncovered claims in the first six months of 2006 to only 654

In the first half of 2006 an average claim stood at R60, 266 while it now weighs in at a hefty R187, 000. It is clear that those attempting to defraud the life insurance companies are trying to up the reward for their dishonesty.

Alert forensic departments save millions

Life Offices' Association CEO, Gerhard Joubert praised alert forensic departments for their efforts in tackling suspect claims. "If left unchecked, fraudulent and dishonest claims would over time substantially increase the claims experience of life companies. And such a trend could force companies to push up premiums," said Joubert.

The category of insurance fraud contributing most to the increase in value of claims was fraudulent documentation, with fraudulent death certificates responsible for the majority of such claims. As an example: "One of our member companies reported a fraudulent death claim worth R5.3 million. Suspicious forensic investigators found that the death certificate had been signed by a doctor who had never seen the body, the deceased registered as a tax payer after he had already died and that the fingerprints on the death certificate did not match those of the death register at Home Affairs."

With conditions at many of the country's morgues far from ideal it is not difficult to imagine increases in this type of fraud in coming years. Individuals with malicious intent simply have too much access to bodies, official documents and corrupt officials for the insurance companies to rest easy.

An R80 billion payout over the same period

Cases involving material non-disclosure remain the largest category encountered by fraud investigators. There were 291 such cases in the first half of 2007, down from 682 in the comparative 2006 period. Mis-representation cases also decreased from 437 cases to 121 cases. Again rand values of claims were similar or higher.

The geographic spread of claims also threw up some unexpected results. The majority (47% of claims) were submitted in KwaZulu-Natal while Gauteng (20%) and the Easter Cape (8%) lagged by some margin. Joubert says the figures are partly the result of a life company uncovering a number of insurance fraud syndicates operating in KZN.

Of course there were positives in the period too. Joubert says that "While claims worth R122.3 million were rejected in the first six months of this year because of fraud or other irregularities, life companies settled honest claims worth nearly R80 billion over the same period, a 13% increase over the first half of last year."

Asking the difficult questions

While we welcome the drop in overall cases, we find it difficult to interpret this drop in light of the concomitant rise in refused claim value. These numbers seem to indicate a shift in strategy at the forensic departments at various life insurance companies. It is almost as if they have received instruction to investigate claims with higher values.

The result may be that 'insignificant' (in terms of rand value) fraudulent claims are falling through the cracks. A three-fold increase in the average value of refused claims on basis of fraud is definite cause for concern, and the company's involved should definitely investigate thoroughly to establish the reason for this increase. That is if they don't already know...

Editor's thoughts:
While the drop in fraudulent cases was impressive, the high rand value of claims raises some questions. It seems strange that the average value of a refuted claim has nearly tripled from one year to the next. Do you think the significant decrease in cases is a result of forensics departments focussing on higher value claims? Send your comments to

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