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SA sees escalation in funeral insurance fraud

More than 2 000 claims to the value of more than R80m found to be dishonest in 2020.
Workers from Vuyo's Funerals set up a ceremony marquee in Soweto. Image: Waldo Swiegers/Bloomberg

South African life insurers have reported a 12% increase in fraudulent claims across all lines of risk business in 2020, according to fraudulent and dishonest claims statistics released this week by the Association for Savings and Investment South Africa (Asisa).

Insurers reported 3 186 cases of fraudulent and dishonest claims to the value of R587.3 million for the year, up from 2 837 such claims amounting to R537.1 million in 2019.

It was also revealed that 31% of all fraudulent and dishonest claims were detected in KwaZulu-Natal, followed by the Eastern Cape and Gauteng at 16% and 15% respectively.

Funeral cover an ‘easy target’

Asisa reveals that the highest incidence of fraud and dishonesty took place within the funeral insurance space, where over 2 000 claims to the value of R80.8 million were found to be dishonest.

“Since funeral insurance policies do not require blood tests and medical examinations and are designed to pay out quickly and without hassle when an insured family member dies, criminals and dishonest individuals most commonly try their luck in this space,” says Megan Govender, convenor of the Asisa Forensics Standing Committee.

He believes that while funeral insurance has always been regarded as an easy target by fraudsters, the increase in fraudulent and dishonest claims does not come as a surprise given the country’s tough economic climate even prior to the Covid-19 pandemic.

He says the pandemic – which [has induced] significant losses in the job market – has worsened the situation and made it “more tempting for dishonest policyholders and syndicates to try their luck in the hope of scoring sizeable insurance payouts”.

The challenge of providing proof of death 

Some of the shocking incidents of fraud involving funeral policies include “buying dead bodies”, which involves mortuary employees selling dead bodies to syndicates, which then use these bodies to claim against policies that were fraudulently taken out some months prior.

Govender points out that not only has desperation driven more people to resort to crime, but with the pandemic having led to an increase in deaths, it has become easier to for fraudsters to source dead bodies for their dodgy claims from overwhelmed mortuaries.

“If funeral cover is taken out on someone who does not exist by submitting fraudulent documentation, the criminal will have to commit a further crime by either buying a dead body or murdering someone to enable them to claim.

“Buying an unclaimed dead body is usually the easier option,” he says.

Govender has come across cases where families are so desperate for payouts from funeral policies that an unnatural death is orchestrated after a family member has died from natural causes within the waiting period.

‘Untenable’ … and risky

He says while fraudulent and dishonest claims seem like a drop in the ocean when compared with honest claims paid, he urges life insurers to vigorously counter fraudulent and dishonest claims to prevent them from leading to untenable claims rates that would ultimately result in higher premiums for honest policyholders.

Read: FSCA slams high premium increases on funeral policies

Govender points out that while life insurers are frequently accused of trying to avoid paying claims, the numbers actually tell a different story.

But to protect honest policyholders, Asisa warns those considering a dishonest or fraudulent claim that life insurers have put in place “extremely sophisticated fraud detection mechanisms” using artificial intelligence and data.

“The chances of being caught are extremely high and the consequence is likely to be a lengthy prison sentence,” says Govender.

Palesa Mofokeng is a Moneyweb intern.

COMMENTS   5

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Dishonesty , fraud , corruption ripple right down into society from our ANC gang posing as government.

The Niehaus Effect?

Why is wrong when citizens behave in the same way as the government does?
Maybe if we had an honest government we would have a different situation.

I read somewhere that the average SA has 5 insurance products, they seem to be easily attainable. Someone phones you asks a few details and boom there you have yourself a new policy for only a few Rand. Easy come easy go.

This article is unbalanced as its just a finger pointer instead of showing both sides facts and faults…

Trading in corpses????

How low can you go?

Taking their queue from our illustrious government I suppose never low enough.

Forget these policies, keep it in the family. There are too many issues for respectable people. Major drama for your family if you die at home. We are still waiting for payout on my mother and brother in-laws policies. Absolutely useless investments.

End of comments.

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