The Forensic Standing Committee of the Association for Savings and Investment South Africa (Asisa) says that in 2022, South African life insurers and investment companies detected 8,931 cases of fraud and dishonesty, preventing losses of R1.1-billion and losing R77-million to fraud.  

Jean van Niekerk, the convenor of the Asisa Forensic Standing Committee, says the committee significantly increased its focus on data collection and trend analysis in the past year to enhance the early detection of changing trends. 

Preventative measures that proved successful included collaboration by the forensics departments of life insurers and investment companies with other crime prevention initiatives, the use of big data, machine learning, artificial intelligence, improved data sharing and enhanced authentication mechanisms such as biometric customer identification.

The Asisa fraud statistics are divided into five categories, as outlined in the table below:

Asisa fraud statistics for 2022 

Sales fraud

Van Niekerk says deliberate attempts by sales agents (call centre agents and tied agents) and independent financial advisers to benefit financially through the earning of commission and fees instead of acting in the customer’s best interests are considered extremely serious by the industry.

Typical sales fraud includes cases where dishonest intermediaries write up policies for clients without the client’s knowledge to earn commission from the life insurer. Van Niekerk says some dishonest intermediaries collude with human resources staff to obtain employee payment information, and in other cases, fraudulent business was written using existing customer details.

Actions taken against dishonest sales agents include the debarring of advisers by the Financial Sector Conduct Authority (FSCA), dismissal, the cancellation of broker contracts and criminal charges.

Drop in claims fraud

Van Niekerk says that compared with 2021, there was a significant decrease in fraudulent and dishonest life insurance claims, aligned with slower sales of new policies. About 1.2 million fewer recurring premium policies were sold in 2022 than in the previous year.

Funeral insurance once again attracted the highest incidence of fraud and dishonesty in 2022, followed by death cover, disability cover, hospital cash plans and retrenchment/loss of income benefit cover.

There was an increase in the value of fraudulent and dishonest disability claims as well as retrenchment and loss of income benefit claims. Van Niekerk says these risk products are often targeted during times of economic hardship by desperate policyholders. He says retrenchment and loss of income claims are flagged as fraudulent when they are submitted despite there being no retrenchment or loss of income.

Fraudulent and dishonest claims statistics 

Short-term insurance fraud

In the short-term insurance industry, insurance fraud is committed by either the inflation of a legitimate claim by claiming for items not stolen, lost or damaged, or through the submission of false claims where people stage incidents such as the theft of a vehicle and then submit a claim.

According to data collected by Santam, the incidence of insurance crime is fairly evenly divided between motor claims (48%) and non-motor (43%) claims. The most common strategies used by insurance criminals involve claiming for losses incurred before the inception of a policy, claiming for false or staged incidents, and submitting false claim information.

Dr Jerry Chetty, the head of business integrity at Santam, says the emergence of new technology is often accompanied by the emergence of new, more sophisticated criminal strategies. 

“The increase in claims related to the theft of keyless cars illustrates this interconnectedness of criminal activity. Tech-savvy criminals have developed tools that can interrupt the signals transmitted from key fobs to keyless cars. These incidents are known as CAN or relay attacks,” he says.

In its annual report for 2023, the South African Insurance Crime Bureau says its investigators are regularly uncovering fraud cases where stolen identities were extensively used by a syndicate focusing on premium refunds. The syndicate would use the stolen identities to insure high-value vehicles, buildings, contents and portable items, resulting in relatively high premiums. They would then make changes to the policies that ensure a refund of premiums, and the refunds would be diverted into the bank accounts of money mules. DM