Asisa stats reveal that sales scams are the main source of insurance policy fraud

Published Dec 5, 2023


Over half, 57%, of all fraud cases recorded by Association for Savings and Investment South Africa (Asisa) members in 2022 were classified as sales fraud – dishonest intermediaries writing up policies for clients without their knowledge to earn a commission.

According to Asisa, sales fraud worth only R719 688 was prevented, while companies lost R14.1 million.

This information is contained in the report by the Forensic Standing Committee of Asisa, which released its most comprehensive set of fraud statistics yet, which for the first time includes fraud reported by investment companies and a new category for sales fraud. Previously, Asisa released only fraudulent and dishonest claims statistics reported by life insurers.

Asisa Forensic Standing Committee convener Jean van Niekerk said the detailed fraud statistics provide a better overview of the magnitude of the problem the industry is grappling with.

Van Niekerk said that since Asisa members published their sales fraud figures for the first time in 2023, trends will only emerge in 2024.

According to Van Niekerk, deliberate attempts by sales agents (call centre agents and tied agents) and independent financial advisers to benefit financially through the earning of commission and fees instead of acting in the customer’s best interests are considered extremely serious by the industry.

He said in some cases, dishonest intermediaries colluded with human resources staff to obtain employee payment information. He adds that there have also been cases where fraudulent business was written using existing customer details.

He said actions taken against dishonest sales agents include the debarring of advisers by the Financial Sector Conduct Authority (FSCA), dismissal, the cancellation of broker contracts, and criminal charges.

Asisa said fraud and dishonest life insurance claims (2 618) comprised 29% of total cases in 2022. However, the rand value of these claims significantly exceeded all other fraud categories in 2022, with R770.5m in losses prevented and actual losses of R17m recorded.

“By comparison, honest policyholders and beneficiaries received claims and benefits payments worth R578 billion from South African life insurers in 2022. The payments included claims against life, disability, critical illness and income protection policies, and retirement annuity and endowment policy benefits,” Asisa said.

Van Niekerk said that compared with 2021, when 4 287 cases were detected, there has been a significant decrease in fraudulent and dishonest life insurance claims.

“However, the value of losses prevented remained sizeable, dropping off only slightly from the R787.6m thwarted in 2021 across all lines of risk business," Van Niekerk said.

According to Van Niekerk, the drop in claims fraud in 2022 is aligned with slower sales of new policies. Some 1.2 million fewer recurring premium policies were sold in 2022 than in 2021.

Van Niekerk said that funeral insurance once again attracted the highest incidence of fraud and dishonesty in 2022, followed by death cover, disability cover, hospital cash plans, and retrenchment/loss of income benefit cover.

He said with interest the increase in the value of fraudulent and dishonest disability, as well as retrenchment and loss of income benefit claims. While the number of dishonest disability claims was lower in 2022 than in the previous year, the value of the losses prevented increased by R68.6m. Similarly, the value of fraudulent and dishonest retrenchment and income benefit claims jumped from R1m in 2021 to R99.7m in 2022.

Van Niekerk said these risk products are often targeted during times of economic hardship by desperate policyholders. He says retrenchment and loss of income claims are flagged as fraudulent when submitted even when there was no retrenchment or loss of income.

“We have seen cases where opportunistic self-employed individuals and entrepreneurs selectively provide information relating to loss of income to make it appear as if they have suffered a complete loss of income,” said Van Niekerk.

Asisa said most fraudulent and dishonest claims were uncovered in KwaZulu-Natal, followed by Gauteng, the Eastern Cape, and the Western Cape.