Posts Tagged ‘Insurance Fraud’

On 16 March 2010, the South African Insurance Association (SAIA) launched its new industry Code of Conduct at the Johannesburg Country Club, Woodmead.

The South African Insurance Association (SAIA) represents the short-term insurance industry in South Africa at all levels and with all stakeholders to ensure a sustainable and dynamic short-term insurance industry for the benefit of all involved.

The SAIA acts as the spokesperson of the industry seeking to constructively work with all relevant stakeholders including consumers and users of short-term insurance, Government, the media and other relevant entities.

Purpose of the Code

The purpose of this Code is to: Promote high ethical standards and good business practices in the short-term insurance industry by giving specific guidance on acceptable and unacceptable practices in all the phases and relationships of short-term insurance business; and Give current and potential customers of short-term insurance products a clear indication of the self-imposed guidelines followed by SAIA members who provide such products to them.

Although the guidelines in this Code extend to the associates of SAIA members, the purpose of the Code is to regulate the services offered on behalf of SAIA members by their associates, and not to regulate entities outside the SAIA member base.

The Code therefore forms the basis for resolving any conflict which may arise between consumers and insurers and their associates – while acting on behalf of insurers – that relates to the requirements of this Code.

The sections in the Code relevant to the South African Insurance Crime Bureau are as follows:

11. Fraud and improper conduct
Members of the SAIA are unequivocally opposed to fraud and improper conduct, and will do everything in their power to identify, verify, investigate and prevent such behaviour. SAIA members will follow the following standards in this regard:
11.1 Insurers
All insurers are expected to participate in combating fraud and improper conduct.
11.1.2 Should an insurer cancel a contract with an associate due to the fact that that associate was found to have acted fraudulently or in an improper manner, the following procedure will be followed by the insurer: The insurer will inform the customers of the associate about the cancellation of the contract between the insurer and the associate, as well of the options available to the customers including retaining their current policies with the insurer directly or through another associate, or moving their business with the Associate; Inform the South African Insurance Crime Bureau (SAICB) of the cancellation of the contract with the associate and the reason for it;
11.1.3 Should an insurer be approached by an associate with a book of business, the insurer will establish with the SAICB whether another insurer has notified it about the cancellation of a contract with that particular associate due to the fact that that associate was found to have acted fraudulently or in an improper manner. Should the insurer find out that that associate had in fact been referred to the SAICB, the insurer should not accept business through that particular associate.
The SAICB has put in place systems to incorporate this function into its overall strategy. For further information on this or assistance, please feel free to contact Melanie Pillay on melaniep@saicb.co.za or Hugo van Zyl on hugovz@saicb.co.za
We would like to urge all role players in the car insurance industry to combat insurance fraud!!
[Information from the Newsletter of the South African Insurance Crime Bureau]

Also view:

• Blog Posts on Fraud and Car Insurance

2009 has been a challenging year for most of us. Even though there might have been positives, most of us are looking forward to 2010 and are praying for an upturn in the economy. Too many jobs have been lost and most people have struggled with debt and acquiring loans from banks and other financial institutions.

In these turbulent times it has been more important to check financial portfolios and curb spending. Consumers have been more price sensitive and brokers have struggled to market and sell additional investment products or life cover. On the short term insurance side pricing has become one of the primary factors considered in financial decisions. Consumers have been searching more for ways of finding cheaper car insurance.

But how far would you be willing to go to make a few extra bucks? Would you ever consider crime as an option? I have come across an interesting story by Emily Friedman and Vanessa Weber titled “Bad economy leads to burnt cars and insurance fraud”. This details perhaps the worst type of insurance fraud.

In their article the authors reveal how across the US, desperate Americans are lighting their own cars on fire when they can no longer afford the payments. They then report the vehicles stolen and try to collect the insurance money.

Disturbing trends of burnt vehicles and car insurance claims

Rather disturbing trends reveal that:

• So many cars are getting lit up in Las Vegas that the city’s Police Auto Theft Unit patrols the roads for burned out cars.
• The driving factor behind these burnt-out vehicles is the weak economy.
• During 2009 on one stretch alone, police say they’ve found the charred hulks of at least 70 torched cars.
• Police helicopters find other abandoned vehicles hidden in crevices and on peaks in the middle of the desert.
• Police said since the drive to desolate sections of the desert is a one-way mission over harsh terrain, the bottoms of these vehicles are usually torn out before the burn even begins.

Police in the US have pleaded with the public to be aware of the immense dangers of putting their vehicles on fire, saying that the risk of bodily injure far outweighs the potential financial gain.

Examples of insurance fraud

Reference was also made to 2 interesting cases of insurance fraud:

• A Nevada man suffered second and third degree burns on his arm and hand when he burned his girlfriend’s car when she wanted out of her car payments. He was charged with – amongst other charges – arson and insurance fraud.
• In California a man could not handle the burden of car payments and then hired a man to steal and burn the vehicle to collect the insurance. He claimed to police that his car had been stolen from a local golf course.

What are the risks in South Africa?

In South Africa vehicle owners are not obliged by law to insure their vehicles. The consumer who struggles with car insurance payments would merely stop paying the car insurance premium and risk all the dangers of driving an uninsured car. It is however also a risk in South Africa that the vehicle owner who struggles to make his monthly payments to the bank could opt to exit this contractual agreement by committing the criminal act of insurance fraud.

The insurance industry will need to be cautious and alert to these disturbing trends from abroad. We will need to create more awareness of insurance fraud, the consequences thereof and the efforts to investigate, find and bring offenders before the full force of the law!

Also view:

• Be alert to the types of Car Insurance Fraud
• South African Insurance Crime Bureau tackles insurance fraud
• Blow the whistle on insurance fraud

The Car Insurance Blog is pleased to share an important update on the fight against insurance fraud in South Africa. The South African Insurance Crime Bureau [SAICB] has, at the start of November, reviewed a year of operations and provided insight in the efforts to reduce insurance fraud threatening the insurance industry!

Objectives in establishing the SAICB
The SAICB was launched on 30 October 2008 and was established to address the ever escalating problem of insurance fraud and crime in the short term industry, and especially organized/syndicated insurance fraud.

Membership of the SAICB
The SAICB was the result of many years of investigation, research, debate and fact finding missions by the short-term insurance industry through the South African Insurance Associations’ (SAIA) Fraud Committee and Task Team. The SAICB currently has eleven member companies including Santam, Mutual & Federal, Hollard, Zurich, Lion of Africa, Regent, FRSTIA, Absa Insurance, Standard Insurance, Telesure and MiWay.

A year in review
Mr Servaas du Plessis, Chair of the SAICB Board commented on the very difficult and successful first year of the SAICB. “We anticipated challenges and some teething problems, but our challenges and setbacks were way bigger than what we expected. The true potential and ability of an institution is however revealed in difficult times. We had to go back to the drawing board, revisit our initial strategy and we had to amend our original business plan with the lessons learnt,” he said.

“Through sheer determination of the SAICB staff, the support from management and the member companies, we can report today that the SAICB is established, functional and producing results. Although we still have a very long road ahead, the SAICB has made massive strides in indentifying fraudulent activities from opportunists, syndicates and service providers servicing clients in the short term industry,” he added.

Mr Ronnie Napier, Chairman of the SAIA Board commented, “We are proud and excited about the first year of the SAICB and the strides they have made in bringing the industry together in this fight, and the successes they have already achieved. I am also particularly proud of the SAIA and SAICB member companies for the commitment they have shown in making this initiative a success, and for their willingness to embrace the concept of sharing their information to achieve the desired outcomes. The SAICB is testimony to the fact that the short term industry will do whatever it takes and is committed to the fight against crime and fraud and that we will be successful.”

Dr Graham Wright, Chief Executive Officer of Business Against Crime SA, added, “The SAICB has enabled the short term insurance industry to identify and investigate fraudulent and criminal events across multiple insurers through the analysis of shared information. This facility has enabled the formulation of joint industry approaches to the management and analysis of information held by the industry members, as well as improving liaison between the industry and government departments and other business sector entities. The capabilities set up by the industry through the SAICB have not only improved the ability of the industry to root out fraudulent activities, but have also strengthened government’s hand at dealing with crime within the country.”

The consensus in the short term insurance industry, partners, policing authorities, government and business associates is that the SAICB is and continues to be a valuable tool and institution in the fight against insurance fraud and crime, and will only go from strength to strength.

Hugo van Zyl, Chief Operating Officer of the SAICB, commended the industry for embracing the SAICB and its challenges, and commented, “The success of the first year of the SAICB is directly linked to the level of cooperation received from our member companies, stakeholders and partners, and especially the committed cooperation of the policing and prosecution authorities. The relationships built within the short term industry in particular and the broader financial industry, and other related companies and associations addressing crime and fraud, has further enhanced what we have achieved and will achieve in the future.”

The SAICB is currently staffed by 10 employees, and is fully operational. Through proactive initiatives, the SAICB has saved the industry approximately R2 million, and is working on cases to the value of approximately R55 million.

It is expected that many more cases of insurance fraud will be investigated by the SAICB. As more consumers become aware of the successes by the SAICB, we will find many more reports and also awareness by the consumers that crime does not pay – that fraudulent claims will be investigated and fraudsters brought to face justice!

The Car Insurance Blog would like to share this information with the objective of creating more awareness of the efforts to curb insurance fraud. May we be able to reduce fraudulent claims in the best interest of all car insurance policyholders!!

Also view:

• Blow the whistle on insurance fraud?
• Types of Car Insurance Fraud
• Can polygraph testing stop car insurance fraud?
• Would you lie on your car insurance claim?

We have written on this blog about fraud in an attempt to alert vehicle owners to the dangers of car insurance fraud. These posts reflected on topics such as types of car insurance fraud and whether polygraph testing could help to reduce car insurance fraud.

I am a firm believer that the law needs to be hard on fraudsters and that the criminals convicted of these “white collar” crimes need to be punished harshly! Punishment should be a deterrent to others considering a false claim! In the post titled “Would you lie on your car insurance claim?” we made reference to the fact that some people appear to justify fraudulent claims as if there is no significant harm to anyone…Nothing can however be further from the truth!

Insurance fraud is not something to be seen as a matter between a client and his insurance company! Insurance fraud affects us all and fraudulent claims are not only costing the economy – it is costing you and me in more expensive insurance premiums and having to endure more suspicion from insurance investigators when submitting our legitimate claims! It is believed that the most under reported fraud is to be found in the insurance industry.

What is the extent of the problem of insurance fraud in South Africa?
I have come across interesting revelations on insurance fraud in South Africa in an article by Paddy Hartdegen. [This appeared on Property24.com]

I would like to quote some important facts on insurance fraud in South Africa:

• Adam Samie, chairman of the South African Insurance Association, estimates that insurance fraud is costing insurance companies at least R2bn a year – equivalent to about 10% of the claims submitted.
• Vivienne Pearson, stakeholder relations manager for the Association, says that these statistics are way too conservative and she estimates that local insurance fraud is in line with international trends and that fraudulent claims amount to about 30% of the claims submitted annually.
• The attitude of 30% of insured South Africans is that, in the event of a claim for losses or damage, they have a right to get back more than they’re actually entitled to receive.
• The South African Insurance Association says that in 2008 the short-term insurance industry paid claims worth R22bn. If Pearson’s estimates are correct then that means around R6,6bn of the money paid was fraudulently acquired by the insured people.

The author, Paddy Hartdegen makes a very concerning statement when he says that between 10% and 30% of all well-to-do South Africans – who can afford to be insured – are stealing money from the insurance companies. They are doing so wittingly and without the slightest signs of remorse.

How much less could you and I could have paid for car and other short term insurance if these insurers did not have to make provision for losing R6,6bn in fraudulent claims?

How do we report car insurance fraud in South Africa?
We are well aware of the consequences of insurance fraud. Fraudulent claims can lead to prosecution and jail and can result in an insurance company disallowing the entire claim and refusing to make any payment under the insurance policy.

We, as law abiding citizens should consider reporting instances of insurance fraud. These fraudsters are not only causing damage to the economy but are hurting ourselves, our friends, colleagues and family. They make it difficult to pay the expensive car insurance premiums and their fraudulent claims are benefitting only their own pockets. To put it rather bluntly – “they are giving you and me a big Up Yours!”

Because of the high levels of insurance fraud in South Africa, the South African Insurance Association has on the 30th of October 2008 launched the Insurance Crime Bureau to investigate and prosecute fraudulent insurance claims.

If you are aware of insurance fraud – report this to the Insurance Crime Bureau. The contact details are as follows:

Address:
South African Insurance Crime Bureau
PO Box 2522,
Halfway House
Johannesburg
Gauteng
South Africa
1865
Telephone: +27 11 021 1432/3/4/5
Fax: 0866 317796
Website: http://www.saicb.co.za/
Insurance Fraudline: 0860 002526

May we be pro-active and alert the authorities of these fraudsters. The next time somebody tells you with a big smile on his face about his undeserved insurance payment – make a note and act on it!

The quicker we stamp out insurance fraud, the quicker our own premiums will fall!

Also view:

• Types of Car Insurance Fraud
• Can polygraph testing stop car insurance fraud?
• Would you lie on your car insurance claim?