Insurance fraud is costing the industry billions each year, a cost that legitimate policy holders must cover.
With consumers and businesses coming under increasing pressure from higher interest rates and inflation, insurance companies are experiencing an increase in the number of fraudulent insurance claims.
Adam Samie, chairman of the South African Insurance Association, said the cost of fraud on the short term insurance industry alone was R2billion. He said that more than 10percent of claims in South Africa were fraudulent.
This was a conservative estimate said Viviene Pearson, stakeholder relations manager for the SAIA. "Internationally, 30percent of all claims are fraudulent and we feel that the rate is the same for South Africa," she said.
Last year R22billion in claims was paid out by the insurance industry. This means that as much as R6,6billion was stolen from the pockets of loyal policy holders.
Policy holders are currently paying about R50 to R60 in premiums each month as a result of insurance fraud.
He was calling for an urgent need for industry experts and professionals to address the issue through the Insurance Crime Bureau (ICB), an independent body aimed at curbing and preventing insurance related crime.
A common fraud tactic is when underwriters within insurance companies conspire with external syndicates to file false claims.
An example is where a car that has been in an accident is insured and a claim is filed whereas the accident happened before the policy was taken.
The ICB will begin operations next month where a central database will be shared by the entire industry to pick up suspicious claims.
The Bureau will also act to bring awareness to people who may not realise that they are indulging in fraud.