The insurance industry comes under fire as the cost-of-living crisis increases

The insurance industry comes under fire as the cost-of-living crisis increases
Garth de Klerk, CEO of the Insurance Crime Bureau (ICB)

The world is currently facing one of the harshest economic climates experienced since the 2008 Global Financial Crisis, one of the worst financial crises in modern history. This raises concerns that more people may turn to fraud to address the financial pressure they are experiencing.

“Rising inflation and the current war in Ukraine are two major contributors to an increasing cost of living crisis. This is putting many people in a difficult financial position; reports out of the United Kingdom show that people are increasingly considering turning towards fraud to relieve this pressure,” says Manie van Schalkwyk, CEO of the Southern African Fraud Prevention Service (SAFPS).

Recent international fraud tactics

Research by the Insurance Fraud Bureau (in the UK) points out that as many as one in four young adults now say they would ‘likely’ consider an act of insurance fraud if they were struggling financially, which is a marked increase when compared to the same survey results taken last year.

The 2023 survey found that if struggling financially, one in four (27%) 18-24-year-olds would think about lying on an insurance application to save money. In 2022, this statistic was one in five (21%) in 2022. Further, one in five (22%) 25-34-year-olds are considering this type of crime in 2023. In 2022, one in six (16%) people considered this.

Insurance fraud to make money is also a growing tactic. The Insurance Fraud Bureau points out that one in five (21%) 18-24-year-olds would consider lying on an insurance claim to make money; this statistic was one in seven (14%) in 2022. Nearly one in five 25-34-year-olds (18%) would resort to the same measures; this statistic was one in seven (13%) in 2022.

The research points out that, across all age groups, one in ten people said they would consider making a fraudulent insurance application or claim if struggling financially. Nearly two in every five (38%) respondents also said they felt financially desperate, specifically due to the impact of the cost-of-living crisis.

Will these stats be replicated in South Africa?

Garth de Klerk, CEO of the Insurance Crime Bureau (ICB), points out that while the ICB does not have access to the same kind of information that the Insurance Fraud Bureau does when it comes to the likelihood of insurance crime increasing within specific age groups, he points out that the ICB is aware of the current economic climate and the overall impact that it has on the insurance industry.

“While we don’t keep the same kind of statistics as to the profile of offenders in South Africa, it is fair to say that there probably is an increase in the same age brackets where youngsters are feeling economic pressure and unemployed. If you have a look at the unemployment rates in South Africa, they are very high in the age brackets discussed in the Insurance Fraud Bureau statistics,” says De Klerk.

Particularly concerning

Van Schalkwyk points out that this is particularly concerning considering the purpose of insurance.

“Insurance is supposed to be a layer of protection for individuals who want to ensure they will be covered should they face a financial loss. Abusing this compromises insurers’ trust with their clients who enter into these contacts based on good faith. We don’t want to get into a situation where insurers will look at every claim with increased scrutiny because of the actions of a handful of dishonest individuals,” says Van Schalkwyk.

He adds that there is also the possibility that this could be a gateway crime to increase the prevalence of money muling.

“Money muling is when a fraudster convinces another member of the public to allow them access to a bank account that can be used that will not arouse the suspicion of authorities. Most of the time, the victim is promised monetary compensation in exchange for this. However, fraudsters use these bank accounts for other things, and victims may find their identities stolen. This creates a greater problem for a person who acted as a Good Samaritan,” says Van Schalkwyk. He adds that the ramifications of being a money mule are extensive.

Van Schalkwyk points out that the SAFPS continuously monitors insurance fraud trends along with the ICB. Further, the SAFPS offers key protection for individuals and companies who become victims of fraud.

Protective Registration

Protective Registration is one of the SAFPS’ most essential services and is the core of its offering.

Protective Registration is a free service protecting individuals against future fraud. Consumers apply for this service, and the SAFPS alerts its members to take additional care when dealing with that individual’s details. Protective Registration provides an added layer of protection and peace of mind regardless of whether the applicant’s identity has been compromised.

“If a member of the public wants to become proactive in the fight against fraud, the SAFPS is there to serve them. Visit our website at www.safps.org.za. Then, click on the fraud prevention tab and protect yourself against identity theft with Protective Registration. For best results, use your smartphone to go to our website. Once you have uploaded key pieces of information, you will add another layer of protection against potential ID fraud,” says Van Schalkwyk.

Victim Fraud Registration

Through Fraud Victim Registration, the SAFPS will assist applicants in preventing identity theft and impersonation fraud.

This will protect applicants from associated financial implications. In addition, the SAFPS will issue applicants a Victim of Impersonation Letter, which they can share with future credit providers to assist in any verification processes.

Consumers are urged to visit the SAFPS website at www.safps.org.za and click Protect your Identity. It is recommended that a smartphone is used in this process and that the applicant has a copy of their ID. Alternatively, applicants can follow the manual process explained on the website.

An Empowerment Platform
It is not only insurers who are becoming victims. The public has become victims of scams in the past where scam artists pose as representatives from the consumer’s insurer and scam people out of significant amounts of money. In response to the growing nature of scams, the SAFPS has launched YIMA, which is proving to be an effective tool.

“Yima is a platform that is a one-stop-shop for South Africans to report scams, secure their identity, and scan any website for vulnerabilities related to scams. They can also educate themselves on identifying a scam. These tools, free of charge, will enable consumers to surf the internet safely. While Yima does not prevent online transaction banking fraud, it allows consumers to shop online more confidently by ensuring that they are using a verified online banking website. Further, the education component of Yima allows consumers to go about their daily lives aware and informed about scams. These are just some exciting elements South Africans can access through the site,” says Van Schalkwyk.

Yima’s priority is to provide the consumer with support before and after they fall victim to fraud and scams. Van Schalkwyk points out that when a person becomes a victim of fraud  and scams, they have to report this to the relevant authorities They are emotionally traumatised and confused, and are often unable to coherently deal with the stress that is related to becoming a fraud victim.

“One of the challenges of the past is that a victim had to approach a number of different authorities to report the case and to begin the process of trying to address the situation. This was very stressful. That is no longer the case as victims have now got access to the Yima scams hotline that will address this challenge,” says Van Schalkwyk.

Users will only need to remember one number rather than search for each institution’s fraud contact centres numbers one at a time when they must deal with a difficult situation.

Van Schalkwyk adds that the SAFPS has partnered with MTN and several key stakeholders to launch a hotline number to report fraud. “By dialling 083 123 SCAM (7226), victims of scams and fraud will be directed via interactive voice response (IVR) to relevant authorities such as the South African Police Service (SAPS) as well as their bank or other registered credit providers to report the incident. This will simplify the process of reporting these cases and will hopefully alleviate some of the stress that victims of fraud experience,” says Van Schalkwyk.

He adds that this is once again another example of how the SAFPS is changing the narrative when it comes to a proactive approach to combatting fraud and what the power of collaboration can contribute to fraud prevention.


ISSUED FOR AND ON BEHALF OF the Southern African Fraud Prevention Service (SAFPS) BY:

LOLA LAZARUS

OF BULLION PR & COMMUNICATION

CELL:  083 271 5336

EMAIL: [email protected]

SAFPS HELP-LINE: 011 867-2234