Insurance fraud is a problem that affects insurance companies all over the world, on a day to day basis. The problem comes due the fact that insurance fraud is not a victimless crime. Unfortunately, it not only affects the insurer itself, but it will also impact the clients of the insurer. When the insurer starts losing millions to fraud each year, your monthly premiums have to be increased. We thought we would look at a few of the scams, that have hit insurance companies, that could be taking cash out of your wallet.
In one year alone, 7 360 fraudulent insurance claims were made and blocked by insurers. This added up to over R400 million worth of potential loss to the companies. This is a mere fraction of what is actually paid out every year to fraudulent claimants.
Crash For Cash Scams
This is the highly risky and potentially fatal act of someone slamming on brakes and allowing someone to crash into them. This is a practice that takes place all over the world and has potentially deadly consequences to the innocent victim. One of the most popular methods is slamming on brakes in front of a truck or bus. There are many dash-cam videos circulating social media of these incidents.
In a documented case of this, the insurer received the claim from the person who had been “rear-ended” by a bus. The same insurer also received 36 claims from “passengers” who had apparently been on the bus. During the investigation, however, it was found out that the bus had in fact been out of service at the time of the accident. It had been driving back to the depot and the only person on the bus at the time was the driver. Should the insurer not have dug a little deeper, and found this information out, they would have had to pay for all of the false claims.
In this scam, that took place in Durban last year, a luxury vehicle that had already been written off was purchased from an insurance salvage agent. The syndicate who bought it paid cash for the wrecked vehicle. The vehicle was issued with a false roadworthy certificate and re-registered as a normal car.
About three months later, the insurance company received a call from the “owner” of the car submitting a substantial claim for the write-off of the vehicle. He claimed that he had been driving his luxury vehicle in Umhlanga when a pedestrian ran out in front of him. He had apparently swerved and wrecked the car. Naturally, none of this was true due to the fact that the car was in fact, undrivable when the syndicate bought it. Luckily, the insurance company investigated the claim and found out the truth. They found the original car wreckage on a property, together with the falsified documentation, and the false claim. It saved the company almost R1.2 million.
This is certainly not a new scam, with the last one having taken place during the course of last year. Seven suspects have been accused of buying a vehicle from a salvage yard. They applied for finance, from a finance house, for the maximum finance amount possible. They then added as many extras onto the application as possible to ensure they had a good amount of finance. Once this was approved and paid over, they reported that the car had been hijacked or stolen to the insurer.
The idea, then, is that the insurer will settle with the finance house, therefore leaving them out of pocket. This syndicate, in particular, was responsible for fraudulent claims to the value of R2.2 million. They have all subsequently been arrested and are facing lengthy jail terms.