Momentum warns about insurance scams in South Africa

Momentum Insure has warned South Africans to be on the lookout for insurance scams and fraud, which have been wreaking havoc across the local insurance landscape. 

“From false and padded claims to fraudsters swindling unsuspecting South Africans out of their vehicles, savings and personal belongings, scams have been wreaking havoc and causing a ripple effect of damage across the insurance landscape,” the company said.

Among the many scams, Momentum said insurers have noted an alarming rise in criminals impersonating policyholders and brokers to obtain copies of clients’ policy schedules and claim histories. 

The criminals then use this information to conduct criminal activity, such as identity theft, submitting false claims to receive payouts to their own bank accounts in the policyholder’s name, and financial fraud.

“Syndicated scams are even approaching vulnerable employees of insurance companies to coerce them into selling registration documents or vehicles that have been recovered after theft and kept as salvage,” said Momentum Insure’s executive head of claims, Funeka Ngewu.

She warned that scammers are also creating fake accounts and tricking consumers into thinking they are paying their insurance premiums or buying new insurance products when consumers are actually depositing funds into these fake accounts.

Ngewu said that some clients have lost money and fallen victim to this tactic. However, she said this phenomenon is not at all uncommon. 

Facebook and Instagram owner Meta recently revealed that of the 2.59 billion active Facebook users in 2023, around 4% to 5% were fake. 

Recent research also showed an increase in brand impersonation schemes, with criminals impersonating prominent companies and creating fake websites to scam consumers into giving away personal data, payments and more.

“We’re seeing a lot of claims where clients are unfortunately handing over their car keys to scammers who pose as buyers falsely claiming that they’ve transferred funds, for the purchase of the car, into a client’s bank account,” Ngewu said. 

“In some cases, we find that some clients are involved in the scam and work with a scammer to swindle their insurer.”

Another prevalent fraud found in the insurance industry is false claims submitted by policyholders.

This includes claims on policies where the insured has not disclosed important and relevant information to the insurer and are among the most common types of scams affecting the insurance industry.

Ngewu said this is often the result of a misconception that insurance companies are able to self-fund these losses and won’t “miss” the money. 

“The reality, however, couldn’t be further from this notion, as false claims directly impact profit margins, resulting in higher insurance premiums for all policyholders,” she explained.

“We have put a number of measures in place from a fraud module perspective and created specialised tools and systems to detect fraudulent claims.” 

“As such, several scammers have been caught, and some are facing criminal charges.”

Ngewu provided some tips for South Africans to avoid falling victim to these scams.

“Dealing with an incident of being scammed is often stressful and emotional, and taking steps to avoid falling prey to criminals is the first step to keeping yourself and your loved ones safe,” she said.

Firstly, she advised people to question everything, especially when an offer seems unrealistic, rushed, or too good to be true. 

“Before making a purchase online or handing over any personal information, be sure to verify the credentials of the person or company you are transacting with,” she said.

Secondly, she pointed out that insurers play an important role in protecting policyholders against fraud and scams, and clients should make use of this.

“Always check with an insurer directly before purchasing any insurance products or agreeing to any services,” she said.

In the event of an insurance scam or fraud, an insurer can also assist in investigating the incident by reviewing any relevant transactions or communications related to the scam and providing advice on the claims process.