Digital detection spells jail time for insurance scammers.
The Insurance Crime Bureau estimates that in 2019 up to 20% of the R35 billion paid out on short term insurance claims could have been fraudulent. If correct this means that in 2019 alone the South African short-term insurance industry lost almost R7 billion to fraud.
The unprecedented financial pressure that consumers are under in 2020, “has certainly increased the frequency and quantum of the fraudulent insurance claims that we’ve picked up to date,” says Christelle Colman, insurance Expert at Old Mutual Insure. In response, the short-term industry is currently on, “high alert for fraud as Covid-19 financial pressures bite,” she adds.
Insurance fraud harms others
Increased financial pressure aside, Colman reports that, many South Africans don’t actually consider gilding the lily on their insurance claims to be a crime. “Many people consider insurance fraud a relatively benign practice that doesn’t harm anyone,” says Colman. Nothing could be further from the truth. Insurance works on the principle that the many contribute to making good the losses of the few. Money lost to the pot by insurance fraud, says Colman, “compromises the ability of insurers to indemnify – or make good – the claims of those who have loyally paid their premiums for years and genuinely suffered loss.”
Where fraud is widespread, insurers will also almost certainly increase premiums and excesses in an attempt to rectify loss-making portfolios.
Insurance fraud can be subtle and insidious. It’s not always about a false or fictious claim. Often people find themselves committing insurance fraud almost unwittingly. For example, people often lie about the detail of the claim, adding a few items that weren’t lost – or increasing the quantum of claims by exaggerating the value of articles lost. Another commonplace behavior is to increase the value of the claim to compensate for the excess. “While many consumers believe this is allowed, it is in fact blatant fraud,” explains Colman. This is why it is important to keep proof of ownership of items as well as the values that you paid for them. It is equally important to keep your insurer up to date and informed when values or other details of cover change.
A common area where people inadvertently fall into committing insurance fraud is when something is stolen or lost, claimed for and paid out – and then the wedding ring is found or the stolen car retrieved a few months later. “Do not just hang on to the returned car or ring,” warns Colman. Since the policy holder had been indemnified – that is, paid out – the lost ring or car now belongs to the insurer. Policy holders who get indemnified goods back should immediately alert their insurer and hand over the goods or they will be committing fraud. The insurer will, in all likelihood, sell the goods to offset the settlement.
If the item is of sentimental value – like your original wedding ring – the insurer will, most likely, give you the opportunity to return the payout that you received for the original loss of the ring. This will, “allow you to keep your original ring while also preventing you from committing fraud,” says Colman.
Insurers see more than you think
The point is that insurers have systems and known behaviours – or ‘tells’ – that pick-up inconsistencies, indicating when insurance fraud is likely in play. Right from the start, for example, says Colman, “the initial call is recorded.” Not only is the level of nervousness of the caller often a tell, but when the detail of what they say on the first call doesn’t stack up with what is finally submitted in the claim, “we know to dig a little deeper,” she adds.
In a digital age informed by data, insurers are also able to cross-check all the information that they have on individuals with, for example, their social media profiles – and even their mobile phone and WhatsApp messages when access to these is permitted as part of an official investigation. This builds a very precise picture of where people were, what they were doing, who they were talking with and what they were saying. “If this throws up inconsistencies with the details of their claim and other statements, then we’re on to something,” says Colman.
It doesn’t’ even need to be that sophisticated. Motor vehicle accident or loss claims between 11 pm and 4 am, for example, are always scrutinized as this is when, “people are socializing, might be drinking and are driving in the dark,” explains Colman.
Insurance Fraud Syndicates
While individual fraud is fairly easy to detect, in recent years insurers have had to deal with professional insurance fraud syndicates. Syndicates target insurers with well-coordinated and executed fraud strategies. For example, media reports have recently highlighted a crime syndicate targeting luxury car owners. Typically, the syndicate calls vehicle owners, pretending to be the vehicles’ manufacturers.
The well-rehearsed caller then arranges to send a tow truck to pick up the vehicle to repair a manufacturing fault that they had ‘just discovered in all their vehicles’. Owners who hand over their vehicles in good faith never see them again. Most of these cases involve, “someone inside one of these companies able to provide the detail that makes claims look real so as to make criminal or fraudulent behaviour look genuine,” says Colman.
Insurance Crime Bureau
In addition to insurer’s internal forensic and investigative systems, the Insurance Crime Bureau (ICB) is a voluntary organisation that insurers provide with data. The ICB is a powerhouse of information on individuals, organisations and practices associated with or involved in fraud. The ICB also provides a platform for the public to safely and anonymously report fraudulent activities or suspected insurance crimes via a toll-free insurance fraud line. While the main focus of the ICB is organised fraud and crime, the bureau also investigates individual repeat offenders and fraudsters targeting insurance companies.
Their aim is not to replace the internal fraud investigation units of the insurance companies, but to understand syndicated and general fraud committed across the industry affecting multiple companies. Either way, consumers should understand that, “insurers collaborate with each other through organisations such as the ICB to combat fraud in the industry on a holistic basis,” she adds.
Fraud is a crime
Whether sophisticated multi-million Rand crimes or smaller individual frauds involving people padding their claim or inadvertently increasing the value of claims, the point is there are systems in place to spot fraud. Fraud is also a crime. In addition to not being paid out, “insurers frequently institute criminal claims again policy holders. These regularly end in substantial fines or even jail terms,” warns Colman.
If policy holders believe they have a legitimate claim and their insurer is not being fair they should approach the insurance Ombudsman. This is an easy online process providing relatively speedy resolution. “The Ombud actively intervenes on behalf of customers in cases where customers have not been treated fairly by their insurer, “advises Colman.
Honesty the best policy
The best policy to avoid insurance fraud remains total – and continual – disclosure. Share as much information and detail as possible and inform insurers as conditions, contents, values or any other details change. Insurance, like all relationships, is built on trust. Trust is founded on clear and consistent communication and constant disclosure. “Honesty is also the best way to avoid insurance fraud,” concludes Colman.