Fraud is crippling SA - and you're paying for it
Honest customers are funding the scourge through hiked insurance and medical premiums, warn industry experts
Fraud is hammering the man on the street, with nearly a third of insurance claims in SA allegedly fake.
And healthcare insurance experts reported at a two-day fraud summit in Johannesburg that fraud in the sector cost the economy more than R10-billion in 2017. SA Fraud Prevention Services revealed that in 2017 new fraud cases registered on its databases increased by 30%.
The message that emerged from the summit was clear: With organised crime syndicates going hi-tech and grant, insurance and health fraud claims rising, corporates and big businesses need to step up and start taking the debilitating crime, which costs the economy billions of rand, seriously.
Thandi Zulu, Black Sash’s Gauteng regional manager, said the number of cases of grant beneficiary fraud was alarmingly high.
“It’s affecting beneficiaries of multiple grants, from children, the elderly and the disabled.”
Citing the Constitutional Court ruling against Cash Paymaster Services and the illegal deductions the company had made from beneficiaries’ grants, Zulu said the disappearance of as little as R90 from someone’s grant could have a catastrophic effect.“Deductions like this were done without beneficiaries’ consent.
“In the case of an elderly grant, the amount is R1,690. But that money doesn’t just support one person, but an entire family.
“When R90 disappears it means there’s less money to buy food. Effectively, one is stealing food off someone’s plate. The illegal deductions were just the tip of the iceberg of a far larger systemic problem in the country which affects the most vulnerable."
Corporate governance expert Peter Goss said company boards were not taking fraud seriously.
“With one in three insurance claims fraudulent, fraud is something which needs to be discussed at board meetings, which is not done.”
He said the alarming rate of fake claims hit the man in the street hard through increased insurance premiums: “Insurance companies raise their premiums to finance the risk of fraud. The net effect is that honest customers fund fraud.”
Goss said fraud had to be addressed with the same seriousness as profitability and quality of products, with board audit committees having to pay much closer attention to fraud risk.“At the moment the focus of companies is ‘let’s catch the criminal’, which is not the right strategic and long-term approach. This is because it requires law enforcement agencies to be able to place these criminals in jail. The problem is law enforcement agencies do not have the capacity to address complex economic crimes, which are committed by highly organised and sophisticated syndicates. These are not people operating out of a small rooms in disadvantaged areas.”
Goss said a solution was for business to pressure the government to form a collective approach to deal with economic crime and involve civil society and the public and private sectors.
Manie van Schalkwyk, SA Fraud Prevention Services’ executive director, said that in 2017 they had established, through data supplied by the retail industry and banks, that more than R2-billion had been saved through the prevention of potentially fraudulent claims.The service contains databases where banks and retailers can list fraud-case information and where victims of identity fraud can list their compromised details.
Van Schalkwyk said the figure was calculated by companies checking to see if someone was listed for fraud.
“If they are, they don’t get the loan. Our clients then calculate how much they potentially saved by not granting the loan or retail account.”
Van Schalkwyk said that on their database new fraud cases increased by more than 30% in 2017, “which is a staggering figure”.
“What is alarming is how crime syndicates are adopting technology and turning to artificial intelligence and sophisticated computer systems to commit fraud.
“The country needs to adopt technology to counter this growing trend.”
Camilla Naidoo, a healthcare forensics senior specialist at Afrocentric Group, which owns Medscheme, said that in 2017 more than R10-billion was lost through healthcare fraud.
“This is one of the contributing factors as to why healthcare insurance is so expensive.”
She said healthcare insurance fraud was linked in part to socio-economic circumstances in the country.
“We will never stop fraud in the healthcare industry, but we can do something to deter it.
“The solutions are education of the public and corporates, and the establishment of a platform where fraud can be reported through whistle-blower lines.”