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Millions lost to insurance fraud annually, but Insurance Crime Bureau is making steady inroads 

Millions lost to insurance fraud annually, but Insurance Crime Bureau is making steady inroads 
Lisakanya Venna
By Lisakanya Venna
27 Nov 2024
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Insurance fraud is on the rise in South Africa, but industry players are not taking it lying down. They are fighting back.

The Road Accident Fund (RAF) reports it has blocked and prevented the payout of R65-million in fraudulent claims over the past three years, and the annual report of the South African Insurance Crime Bureau (SAICB) reflects similar successes. 

The RAF has reported a significant increase in insurance fraud in South Africa, which comes amid tough economic conditions in the country, with high inflation and interest rates contributing to desperate individuals attempting to defraud the system. The Fund has rejected 2,031 fraudulent claims totalling R65-million over three years. These claims were not processed and finalised because they were identified as fraud. 

The RAF cited the example of Siyabulela Kima, who submitted a claim for R8.3-million. In his claim, Kima said an unknown speeding vehicle overtook a truck, left its lane and collided with his car, causing him to lose control of his motor vehicle and crash into a nearby house. However, further investigation revealed that the accident resulted from Kima’s having an epileptic attack while driving, and no second motor vehicle was involved. He was sentenced to five years in prison. 

Read more: SA’s cost-of-living crisis takes its toll on burdened consumers

Fight against fraud 


A competent fraud detection strategy has streamlined the process of paying out legitimate claims, with the fraud detection unit identifying more than R1-billion in fraudulent claims for further investigation over the past three years. The fund has been able to verify employment or personal information, by partnering with law enforcement agencies and government departments.

However, the SAICB, a not-for profit organisation geared towards combating fraud in the insurance industry, has flagged several concerns in its annual report. For example, “cases against criminals arrested for vehicle crime are often not enrolled or [are] subsequently withdrawn due to various factors such as poor response on crime scenes by first responders, incomplete statements by SAPS members and a lack of understanding of the latest modus operandi of criminals by the Prosecuting Authority”.

Impact of insurance fraud


SAICB chief executive officer Garth de Klerk said financial crime has had a devastating impact on the industry.

“It is no secret that the RAF have had control and fraud issues for years, bleeding money to corrupt syndicates. Fraud is perpetrated either through greed or desperation. In South Africa, the economy is in turmoil, unemployment is at record highs and people are prepared to do whatever they can to survive, hence the increase in fraud, theft and even physical crimes.

“We don’t have absolute numbers, but I can definitively say that millions of rands are lost to fraud annually, with a massive direct cost to society,” De Klerk said.

Echoing De Klerk, RAF chief executive officer Collins Letsoalo said fraud cost the RAF money and had a negative impact on service delivery to road crash victims and their families. 

“It is a national problem that threatens the very mandate which the organisation seeks to deliver on for road users,” Letsoalo said.

Operational success


Of the successes over the last year, the SAICB highlighted the discovery of R87-million worth of cloned vehicles, the recovery of R1.44-billion worth of vehicles from pounds, and the return of R428-million worth of vehicles to uninsured members of the public. 

Kagiso Mogale, senior manager of fraud and investigations at Absa, says although fraud was once thought of as someone simply forging a bank statement or faking an invoice, it has become far more complex. 

“Fraud today is a high-tech game of cat and mouse, and we are right in the middle of it. Technology is a double-edged sword in our line of work, collaboration with the ICB and the industry helps us stay ahead of fraudsters,” he said. DM

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