The most dangerous province for fraud in South Africa

KwaZulu-Natal is the province where most fraudulent and dishonest claims were uncovered in 2023, followed by Gauteng and the Western Cape.

This was revealed by the Forensic Standing Committee of the Association for Savings and Investment South Africa (ASISA), which recently released its comprehensive fraud statistics for the industry. 

Following a complete overhaul last year, the statistics cover fraud reported by investment companies and fraudulent and dishonest claims statistics reported by life insurers.

The organisation found that South African life insurers and investment companies detected 13,074 cases of fraud and dishonesty in 2023, a 46% increase from the previous year. 

The industry lost at least R175.9 million to fraud and dishonesty in 2023, a 128% increase from the R77.2 million lost in 2022. 

Convenor of the ASISA Forensic Standing Committee, Jean van Niekerk, attributed the steep increase in fraud detected in 2023 to a combination of the following:

• Ongoing innovation of detection methods by forensic departments
• Increasingly desperate consumers who are willing to commit a crime for extra money
• Criminal syndicates who see life insurers and investment companies as lucrative soft targets.

Van Niekerk said it is vital for the savings and investment industry to ensure that fraud remains in check to prevent fraud-related losses from spiralling out of control and higher claims rates from driving up premiums for honest policyholders.

He explained that many life insurers and investment companies have dedicated forensic departments focused on clamping down on fraud and dishonesty by identifying criminal trends as they emerge. 

“A loss of R175.9 million to fraud and dishonesty is significant, and our industry is focused on clamping down on criminal activity through continuous evolution and adaptation,” he said.

Preventative measures deployed by life insurers and investment companies include using digital technology such as artificial intelligence, improved industry collaboration, and enhanced authentication mechanisms such as biometric customer identification.

In addition, forensic departments share data on criminal activity via industry bodies geared to facilitate data sharing to combat fraud and financial crime, including the ASISA Forensic Standing Committee. 

The committee exists to curb fraud by analysing statistics to understand trends, hotspots, and emerging risks at an industry level. 

It also facilitates the industry’s focused drive to partner with law enforcement agencies and regulators to ensure criminals are brought to book.

Van Niekerk said more than half of all fraud cases recorded by ASISA members in 2023 were classified as remuneration fraud, showing a steep upward trend from 2022. 

“A positive development is the small increase in actual losses, combined with a significant increase in prevented losses. This indicates that our industry’s prevention methods are delivering results,” he said.

Fraudulent and dishonest life insurance claims were the second-highest contributors to fraud cases in 2023. 

“Unfortunately, losses jumped from R17 million in 2022 to R69.8 million in 2023 driven largely by fraudulent death claims,” he said.

However, the organisation reported a decrease in fraudulent withdrawals and investments, although a concerning increase in actual losses was recorded, which jumped from R23.7 million in 2022 to R40.5 million in 2023.

“While the attack rate was lower, the value of prevented and actual fraud increased substantially in 2023,” he comments.

Van Niekerk also identified two concerning trends that have emerged in recent years: murder for insurance payouts and deceased estate fraud. 

“We have requested ASISA members to report on these cases separately, starting with the 2023 statistics, to help our industry find ways to clamp down on these cases with urgency,” he said.

Van Niekerk emphasised that murder is an incredibly serious crime, and committing insurance fraud to benefit financially from someone’s death is not only highly callous but also premeditated to the extreme.

He added that while criminals often see insurance as a highly lucrative target, cases involving premeditated murder to benefit from an insurance payout are not that common. 

Out of the 4,130 insurance fraud cases reported for 2023, 14 cases related to the involvement of a beneficiary in the insured’s death.

“Every death is one too many, and life companies are constantly updating their processes to ensure that risk policies are taken out only by honest policyholders to provide for their families,” he said. 

Life insurers and investment companies also noticed a new trend: criminals target deceased estate benefits and investment accounts. In 2023, life insurers reported 20 cases, and investment companies 34 cases.

Van Niekerk said deceased estate fraud is committed by impersonating legitimate parties, fabricating letters of executorship and other documents, and opening fraudulent bank accounts in the names of beneficiaries by impersonators and false executors.

Fraud claims across provinces

In 2023, the most fraudulent and dishonest claims were uncovered in KwaZulu-Natal, followed by Gauteng, the Western Cape, and the Eastern Cape. 

Van Niekerk said the biggest increase in cases was recorded in the Western Cape.

Province	Number of cases		Percentage change
	2022	2023
KwaZulu-Natal	3,122	3,625	16.1%
Gauteng	1,711	2,301	34.5%
Eastern Cape	1,319	1,210	8.3%
Western Cape	1,020	1,633	60.1%
Free State	440	395	10.2%
North West	327	434	32.7%
Limpopo	310	396	27.7%
Northern Cape	258	194	24.8%
Mpumalanga	209	262	25.4%
International	194	342	76.3%
Region unknown	21	2,282	10,766%
Total	8,931	13,074	46.1%