With white-collar crime on the rise, you might want to keep an eye on your bank statements and salary slips every month. The life insurance industry and the Association for Savings and Investment South Africa (Asisa) are urging people to be aware of an increase in fictitious policies.
If a policy is submitted by a financial adviser in the name of a person who hasn’t authorised the policy, perhaps forging the client signature, this is clearly fraud. But for a fictitious policy to take effect, there has to be a real bank account or payroll system from which a premium can be deducted every month, which means that someone is paying for this premium without realising it.
Peter Dempsey, deputy CEO of Asisa, says that the majority of these policies are funeral policies written in the low-income market, because premiums are low (usually under R100) and there are no underwriting requirements, which makes these policies more accessible to people living in rural areas. Consumers in higher income brackets can also be targeted, though, so nobody should be complacent.
Dishonest financial advisers are often assisted by syndicates that help them obtain your banking or salary details. Syndicates have obtained details from the government payroll system (Persal), for example.
A case that made headlines in 2008 involved a Kenyan syndicate that operated in South Africa. This syndicate managed to acquire boxes filled with salary slips of government employees in KwaZulu-Natal and the North West Province. These salary slips were sold to unscrupulous financial advisers who used the details on the salary slips, together with a forged signature, to write policies for people without their knowledge.
Life companies have a “zero tolerance” approach to financial advisers found guilty of submitting fictitious policies — criminal charges will be laid and they will be blacklisted by the Financial Services Board. Life companies refund premiums where fraud has been committed.
Dempsey cautions opportunistic policyholders hoping to reclaim their premiums from a policy they no longer want from alleging fraud. If your real signature is on the application form, says Dempsey, you can’t prove fraud.
What you can do
- If you discover unauthorised amounts are being deducted from your salary or bank account, notify your employer and the life insurance company — the name will appear alongside the deduction on your statements — by calling the client contact centre. Most insurers have toll free numbers which you can call.
Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information