Insurance fraud costs consumers

Local insurance industry bodies need to work together with authorities to identify and prosecute perpetrators of fraudulent claims, which are costing South African consumers an estimated R3-billion a year. This is according to Jonathan Holden at Lion of Africa Insurance who urges insurance companies to join initiatives such as the Crime Bureau in order to see a potential reduction in insurance premium increases.

With potential insurance increases on the horizon, Jonathan Holden, executive of operations at Lion of Africa Insurance, says insurance companies need to work together to protect consumers by keeping premiums low. A recent Standard Bank report has estimated that the rate of short-term insurance fraud in South Africa accounts for about 15% of premium costs (about R3-billion a year).

Holden says insurance companies and authorities need to cooperate closely to stem the tide, and insurance companies should join initiatives like the Crime Bureau. There are currently 10 member companies of the Crime Bureau: Lion of Africa Insurance, Santam, Mutual & Federal, Hollard, 1st tier, OUTsurance, Momentum, Absa, Regent and MiWay.

How co-operation can keep premiums down
According to Holden, the bureau collects claims from all member insurance companies and works very closely with the South African Police Service (SAPS), the Hawks, the South African Revenue Service (SARS) and the justice system to identify areas of fraudulent claims. He says three cases of fraud amounting to about R580 000 were discovered recently by the bureau. There are also a further 16 cases, worth about R36-million, currently under investigation.

Insurers working with the Crime Bureau can cross-check claims with recent police reports from roads blocks and spot checks to see if vehicle claims are credible. It’s possible to track whether or not a driver was under the influence of alcohol at the time of an accident by checking the claim against data captured by the police from road blocks in the area.

Based on this, the insurance company can either restrict the policy or raise the premiums.

Another initiative by the Crime Bureau led to the recovery of 350 vehicles from two separate police pounds in KwaZulu-Natal. The police force doesn’t have the resources to clear out car pounds regularly, so the Bureau cross-references unclaimed vehicles with insurance records as there’s a large saving to be made from recoverable vehicles that haven’t been claimed.

He says that it is difficult to calculate how much money is lost due to insurance fraud. “The current figures are only based on those incidences that were discovered and do not take into account the cases that are successfully perpetrated,” says Holden. “The actual figure could be much higher and insurance companies need to take responsibility on behalf of consumers to reduce the effects of fraudsters on premiums.”

The Crime Bureau focuses on the short-term insurance industry, but there are plans to extend the scope to the local banking and medical aid sectors.

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