Financial Crime World

Fraudulent Activities in South Africa’s Financial Sector Exposed Through Life Insurance Products

A recent survey conducted by Gen Re, a leading reinsurer, has shed light on the prevalence of fraudulent activities in South Africa’s financial sector, particularly in the life insurance industry. The findings highlight the need for insurers to enhance their fraud prevention and detection mechanisms.

Increase in Fraud Numbers: A Growing Concern

According to the Association for Savings and Investment South Africa (ASISA), which compiles industry fraud statistics, there has been an increase in fraud numbers year over year, with the highest incidence of fraud taking place in funeral insurance policies. ASISA attributed this rise to the COVID-19 pandemic and the tough economic climate it created.

Key Survey Findings

  • 67% of respondents said their claim professionals are trained to identify suspicious fraud indicators
  • However, Gen Re recommends increasing formal training to 100%
  • Only 33% of respondents create and maintain an internal database of suspicious indicators

Areas of Strength and Opportunity

While good use is made in the verification of death claims against government databases (78%), there is significant room for improvement in updating and benchmarking claims data.

Combatting Insurance Fraud: Recommendations from Gen Re

To combat insurance fraud, Gen Re recommends relying on proven methods such as:

  • Investigating capabilities
  • Identifying and monitoring suspicious activity
  • Training assessors and organizations
  • Managing data and benchmarking

Emerging digital, AI and data analytics technologies can also be leveraged to enhance fraud detection, mitigation and prevention in the financial services sector.

Global Market for AI-based Insurance Fraud Detection

The global market for AI-based insurance fraud detection is predicted to reach USD 17 billion by 2028. Gen Re will continue to keep clients up-to-date about the latest developments being employed locally and internationally.

Action Items: Combating Insurance Fraud in South Africa’s Financial Sector

Based on the survey findings, Gen Re recommends that consideration be lent to the following action items:

  • Training: Familiarity with trends, schemes, and suspicious indicators is an important line of defence. Therefore, fraud awareness training for staff should be routinely refreshed.
  • Detection: A layered approach to fraud detection is ideal, combining manual screening for suspicious indicators, automation, and advanced analytics.
  • Investigation: Early claims should be investigated thoroughly for non-disclosure, including screening for suspicious indicators and referral (where indicated) to internal or external fraud resources.
  • Administration: Within the confines of what is legally permissible, internal databases on suspicious indicators should be maintained so that claim information can be checked against this database.

The Fight Against Insurance Fraud: A Commitment from Gen Re

The long-term insurance industry is constantly innovating preventive measures to combat insurance fraud, including the use of AI, data sharing for early detection of trends, and an increased focus on field investigations. Gen Re is committed to the fight against insurance fraud. If you detect fraud, or have suspicions of fraud, you are encouraged to report it to the appropriate authorities.