Nipping fraud in the bud

Abdul Milazi

Abdul Milazi

The life insurance industry has prevented fraud worth R1,3billion over the past five years, the Life Offices' Association said yesterday. The association's chief executive, Gerhard Joubert, said last year alone life companies detected 1512 fraudulent claims worth R279million, and settled valid claims to the value of R90,7billion - a 13percent increase from the R80billion paid out in 2006.

Joubert said that fraudulent claims had reduced by 47percent to 1512 last year from the 2844 cases recorded in 2006, but said although the number of fraudulent claims decreased, there was an increase in the amounts involved, from R242million in 2006 to R279million last year.

He said the forensic departments of the big life insurers had started changing their approach from reactive investigation of suspected fraud to proactive fraud prevention.

"The core of this method is electronic data mining, whereby all client and intermediary data is scanned to such an extent that discrepancies pointing towards fraud are noticed immediately," said Joubert.

He said life companies had also started sharing fraud statistics and information to help detect new trends and syndicate activity as early as possible.

Joubert said syndicates operated mainly in the low income market, mainly in Kwa-Zulu Natal and the Eastern Cape.

"Not only is it much more difficult for life companies to verify and investigate claims in these areas, but in addition to funeral and entry level policy, sales volumes are also the highest in these provinces," said Joubert.

He said all that the syndicates required was a real person's name and identity number.

"Either a client has an existing policy with an insurer and the syndicate submits a fraudulent death claim without the client's knowledge or the syndicate takes out a life or funeral policy on this person's life and pays the required premiums for the waiting period of the policy."

Once the waiting period was over, the syndicate would produce a body with a fraudulent death certificate and claim the death or funeral benefit. Usually these syndicates received tip offs from state mortuary staff or private funeral parlours who were on their payroll when a body was not identified by next of kin, said Joubert.