Insurance policies

Syndicates in South Africa buy insurance policies for their victims – then kill them

Investigations into life insurer frauds have uncovered more evidence of lethal enrichment schemes in which syndicates take out funeral insurance for victims they subsequently kill in order to submit a claim, writes Laura du Preez of the website consumer financial education, SmartAboutMoney.

Unions, particularly in the Eastern Cape, are looking for every opportunity to exploit and there has been an upward trend in unnatural deaths in recent years, Megan Govender, facilitator of the Forensic Science Standing Committee of the Association of Savings and Investment South Africa (ASISA), says.

These organized criminals were involved in 68 of the 3,268 fraud cases involving funeral policies last year, statistics released today by ASISA reveal. In four cases, beneficiaries of policy proceeds were involved in this fraud.

Unions know the policies and procedures of life and funeral insurers. In some cases, they murder a victim. In others, they obtain corpses of the poor from morgues and stage hit-and-run accidents, Govender says.

As insurers do more to uncover fraud, unions have started using runners (or mules) to do the work for them, he says.

It’s not always unions that kill – opportunists, sometimes family members, have also killed for life insurance payouts.

Govender says a life insurer is investigating a suspicious case that arose last year when cover was taken out a day before a mother and daughter were shot dead in a field in the Eastern Cape.

Last year South Africans were shocked by the trial of Nomia Rosemary Ndlovu, a former police officer, who was sentenced to six life sentences for the murder of her partner and five family members in order to to claim funeral and life insurance taken out on their life.

Also last year, Pastor Melisizwe Monqo and hitman Phumlani Qhusheka received life sentences for the 2018 murder of a member of God’s Works International Ministries whose life they had secured. Monqo’s wife, Siphosihle Pamba, was sentenced to 20 years in prison.

High-profile cases involving murder contributed to R787.6 million in fraudulent and dishonest claims on funeral, life and disability claims that were detected last year, ASISA statistics reveal .

Attention to vulnerable people

Increased union involvement has led a life insurer to warn South Africans whose family members abuse alcohol or drugs and/or live on the streets not to leave people without scruples take advantage of this by obtaining their identity papers and taking out policies on their lives.

Priyen Moodley, an independent forensics, risk and business intelligence consultant, says unions are asking for coverage for people who are homeless, sick, drug addicted or involved in gangs or criminal activity.

After a relatively short period of time – usually less than two years – the insured person dies abnormally from gunshot wounds, stabbing or hit-and-run accident and the motive turns out to be the claim insurance, he said.

In other cases, family members ensure the lives of these people because they know they are vulnerable, he says.

Carina Thompson, a manager at Xtnd, a forensics and fraud detection firm that works with Assupol, says people from all walks of life can be victims of fraud, but homeless people and drug addicts are particularly vulnerable.

Sometimes they are forced to help fraudsters make false claims to insurers to initiate a policy, she says.

Moodley suggests vulnerable parents should be encouraged to seek counseling or enter rehabilitation. And they shouldn’t share personal information, such as ID numbers, with strangers, he says.

Preferred funeral policies

Killers looking to profit from their victim’s death often use funeral insurance policies because the cover is easy to purchase and pays out quickly – some companies will pay out in four hours.

Funeral policies also have shorter or no waiting periods for accidental deaths.

Policy benefits can be as high as R100,000 and some insurers pay double the benefit in the event of accidental death. There is also no limit to the number of policies you can purchase.

Protect yourself

Moodley says that if you know or suspect that someone has taken out cover on your life improperly, you have the right to contact that insurer to verify this.

Alternatively, you can contact your financial adviser and request an updated list of policies taken out on your life, he says.

Thompson says there are also mainstream sites that promise free reports. In return, you may need to allow the site to share your details with a financial advisory firm.

Whistle

Govender says fraudulent and dishonest claims accounted for only a small proportion of the R608 billion paid last year to honest policyholders and their beneficiaries.

However, if left unchecked, fraud and dishonesty will ultimately result in higher premiums for honest people, he says.

This is a good reason to report if you are aware of a fraud.

Moodley says insurers have anti-fraud hotlines and you can also report the crime to the South African Insurance Crime Bureau or the police.

You can make reports anonymously, but keep them factual with as much information as possible about who and how is involved in the alleged fraud, he says.

Fraudulent documents

You can also reduce the number of frauds by reporting the theft of your documents or identity cards to the South African Police Service and the Home Office.

Last year, insurers uncovered 2,271 cases worth R295 million involving fraudulent documents.

Fraudsters use identity documents to create fake deaths or falsify birth or marriage certificates, underwrite policies and submit fraudulent claims.

Moodley also suggests that you file the missing documents with the South African Fraud Prevention Services (SAFPS) to report your identity as compromised.

Thompson says you need to make sure you only use correct and credible details from the institutions when providing a family member’s death certificate or death report. Fraudsters can use a death certificate or report to profit from the death of your loved one.

Do not lie

Misrepresentation of facts is also fraud. Insurers detected more than 3,000 cases involving R487 million in which policyholders had misrepresented the facts.

Govender says misrepresenting or withholding important information such as lifestyle or health issues is incredibly myopic.

“When claims are denied as a result, it is likely to have devastating financial consequences for those who are financially dependent on a policyholder,” he says.

In an extreme case detected last year, a nurse used someone else’s blood to support her claim for critical illness benefits. She alleged that she suffered a needlestick injury at work which caused her to become infected with HIV.

Investigations revealed that there had been no such incident. His attempt to defraud the insurer earned him a 10,000 rand fine and a five-year suspended prison sentence.


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