On Thursday, we focused on fraud in the funeral cover space. Today we look at how this manifested in Death, Disability, Hospital cash plans and Retrenchment cover space.
South African life insurers reported a 12% increase in fraudulent and dishonest claims across all lines of risk business in 2020 when compared to 2019. The 2020 fraudulent and dishonest claims statistics, released last week by the Association for Savings and Investment South Africa (ASISA), show that last year 3 186 cases of fraudulent and dishonest claims to a value of R587.3 million were recorded, compared to 2 837 fraudulent and dishonest claims in 2019 valued at R537.1 million
.
Megan Govender, convenor of the ASISA Forensics Standing Committee, says the increase in fraudulent and dishonest claims is not surprising since tough economic conditions make it more tempting for dishonest policyholders and syndicates to try their luck in the hope of scoring sizeable insurance pay-outs.
Death claims
Govender says that, considering the 27% increase in death claims last year because of the Covid-19 pandemic, it is not surprising that there was an increase in misrepresentation and material non-disclosure cases from 276 to 340. Misrepresentation and non-disclosure refer to policyholders not disclosing or misrepresenting material information to a life insurer about a medical or lifestyle condition to secure lower premiums or to obtain cover without exclusions.
According to Govender, misrepresenting material information or not disclosing important information such as any lifestyle or health related detail that could materially affect the terms of the policy, is incredibly short-sighted. “When claims are declined as a result, this is likely to have devastating financial consequences for those financially dependent on a policyholder.”
| 2020 | 2019 | |||
| Cases | Value | Cases | Value | |
| Death Claims | 388 | R264.3 million |
346 | R271.4 million |
| Misrepresentation/ Material Non- Disclosure |
340 | R166.9 milion |
276 | R175.5 million |
| Fraudulent Documentation | 41 | R95.1 million |
62 | R93.3 million |
| Syndicate Involvement | 7 | R2.2 million |
7 | R0.1 million |
| Beneficiary Involvement in death | 0 | 0 | 1 | R2.5 million |
| Adviser/Broker Involvement | 0 | 0 | 0 | 0 |
Disability claims
Misrepresentation and material non-disclosure with the aim of misleading insurers was once again the number one reason for disability claims being declined in 2020. Out of the 325 irregular claims detected, 306 were rejected due to misrepresentation or material non-disclosure.
Govender notes that there has been a significant drop in cases involving misrepresentation and non-disclosure, which is good news. He comments that over the past four years misrepresentation and non-disclosure for disability claims had more than halved from 757 in 2017 to 306 in 2020.
| 2020 | 2019 | |||
| Cases | Value | Cases | Value | |
| Disability Claims | 325 | R233.6 million |
447 | R208.7 million |
| Misrepresentation/ Material Non- Disclosure |
306 | R220.4 milion |
437 | R219.6 million |
| Fraudulent Documentation | 19 | R13.2 million |
10 | R10.2 million |
| Syndicate Involvement | 0 | 0 | 0 | 0 |
| Adviser/Broker Involvement | 0 | 0 | 0 | 0 |
Hospital cash plans
Dishonest claims against hospital cash plans continued their downward trend in 2020, but there was a significant increase last year in the value of these claims.
Govender says hospital cash plans are easy to understand products designed to help consumers cope with unexpected expenses as a result of being admitted to hospital.
He adds that unfortunately, as is the case with funeral insurance products, the simplicity of these products often leaves them wide open to abuse. This forced life insurers to apply heightened vigilance when processing claims to ensure the financial viability of these products.
Retrenchment benefit claims
Govender says considering the high number of retrenchments last year, the drop in dishonest and fraudulent retrenchment claims was surprising. Life insurers declined only 31 claims due to misrepresentation and non-disclosure and 19 due to fraudulent documentation.
Click here to download the full ASISA media release on fraud in 2020.
