ASISA Life insurers report spike in fraudulent death claims

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Spike in fraudulent death claims for 2017

The Association for Savings and Investment South Africa (ASISA) has released its consolidated statistics of fraudulent and dishonest claims for 2017 – and the figures indicate that South African life insurers foiled a total of 5 026 irregular claims to the value of R1.13bn in 2017.

Although the total number of such claims across different types of long-term insurance products was lower than it was in 2016, when 13 488 claims (mostly funeral claims) proved to be irregular, the value was almost the same (R1.03bn).

Meanwhile, life insurers made benefit payments of R469bn to policyholders and beneficiaries in the same year. More than R60bn was paid to individuals who had experienced either death or disability in their family circle (an increase of almost R5bn from 2016).

“The reality is that as the custodians of a significant portion of South Africa’s savings pool, life insurers are obliged to protect the integrity of this savings pool and the interests of honest policyholders by preventing fraud and dishonest,” says Donovan Herman, convenor of the ASISA Claims Standing Committee. “If we left fraud and dishonesty to spiral out of control, honest policyholders would end up footing the bill through higher premiums driven by untenable claims rates.”

Death claims

A total of 2 111 death claims worth R564.2m were declined in 2017 due to fraud and dishonesty, compared to 444 death claims worth R275.2m in 2016. In the majority of these cases (1 784), insurers detected that fraudulent documentation had been submitted. A further 316 claims were declined due to misrepresentation and/or material non-disclosure.

Disability claims

Misrepresentation and material non-disclosure by policyholders was the biggest reason for disability claims worth R516.5m being declined in 2017. Of the 775 claims not paid, 757 were rejected for this reason (in 2016, 621 claims worth R578.8m were rejected). Over the past two years, the industry noticed an increase in legitimate claims against individual disability policies.

Funeral claims

A total of 1 025 funeral claims worth R34.9m were rejected in 2017, mainly due to misrepresentation and material non-disclousre, as well as fraud (in 2016, there were 11 302 irregular funeral claims worth R168.3m). Insurers reported a number of cases where funeral cover was taken out on the lives of people under the pretence that they were family members of the policyholder, when in fact they were either colleagues, fellow church members or even fictional people.

Hospital cash plans

Fraudulent and dishonest claims against hospital cash plans showed a further declined in 2017, largely due to strict measures introduced by life insurers a couple of years ago. A total of 989 claims worth R6.1m were declined (compared to 1 047 claims worth R8.5m in 2016).

Retrenchment benefit claims

Dishonest and fraudulent retrenchment claims increased from 74 in 2016 to 126 in 2017. Life insurers declined 113 claims due to misrepresentation and non-disclosure and 13 due to fraud. The total value of these claims was R3.6m (compared to R2m in 2016).

Which province is the most fraudulent?

KZN comes out on top, with 31% of all fraudulent and dishonest claims detected in the province. The Eastern Cape accounted for 22.3% and Gauteng for 20.5%. The Western Cape was responsible for 6.7% of claims declined and the Free State for 5.1%. The remaining provinces were responsible for 5% or less.