According to figures, 35% of all insurance claims have a fraudulent element. This equates to millions of rands lost every year.
Denis Ternent, Glenrand MIB executive general manager, broking services, says: “White collar fraud continues unabated — South Africa probably has the highest incidence of fraud in the world.”
To reduce the impact of fraud the short-term insurance industry is collaborating in a data-sharing initiative known as the insurance data system (IDS), developed under the auspices of the South African Insurance Association (SAIA). IDS is a centralised database of claims and policy information where insurers can assess the risk of an individual, their address and vehicle.
Chris van Rensburg, sales executive for insurance at TransUnion, the company that won the tender to launch the database in July 2001, says: “This facilitates better underwriting decisions as the risk is assessed upfront.
“By supplying their claims information, the insurers can identify fraudulent claims because the insurer has access to claims information across the short-term insurance industry and can identify duplication.
“Since 2001, the system has grown from a claims inquiry system to a robust central hub of information. The industry as a whole benefits from IDS as companies obtain an external view of their risk and can prevent fraudulent claims more effectively,” says Van Rensburg.
With the improvement of technological and systems infrastructure, data sets and the ability to share information has increased.
Van Rensburg says the database contains information relating to policy lapse rates and loss ratios, which many insurers have now incorporated into their pricing strategies.
Collaborative data pooling makes it possible for insurers to have access to information so that informed underwriting decisions can be made. They can identify where duplicated claims are submitted.
Guy Jameson, executive leader of business development for Alexander Forbes Risk Services, says this has become critical in managing risk and assisting insurance clients to be more accurate in pricing policies.
“This both speeds up underwriting enormously and makes for more competitive pricing.
“Instantaneous access to data means that prices can be adjusted rapidly,” says Jameson.
Van Rensburg says that the savings from the system are not public information, but the savings are believed to measure in the millions. — Eamonn Ryan