Death claims worth R1.13bn were found to be irregular and, therefore, not paid out in 2017, according to The Association for Savings and Investment South Africa (Asisa).
About 31% of all fraudulent and dishonest claims were detected in KwaZulu-Natal, followed by the Eastern Cape with 22.3% and Gauteng with 20.5%. The Western Cape was responsible for 6.7% of claims declined and the Free Sstate for 5.1%. Other provinces were responsible for 5% or less.
Asisa released its consolidated statistics of fraudulent and dishonest claims for 2017 this week.
In 2016 there were 13 488 claims (mostly funeral claims), worth a total of R1.03bn, found to be fraudulent and dishonest.
Donovan Herman, convenor of Asisa's Claims Standing Committee, said in a statement that life insurers were under constant pressure to adapt their detection methods as fraud attempts became more sophisticated due to fast-evolving technology.
Although claims worth R1.13bn were found to be irregular and not paid in 2017, South African life insurers made benefit payments of R469bn to policyholders and beneficiaries in the same year.
"If we left fraud and dishonesty to spiral out of control, honest policyholders would end up footing the bill through higher premiums driven by untenable claims rates," said Herman.
A total of 2 111 death claims worth R564.2m were declined in 2017 due to fraud and dishonesty, compared to 444 death claims worth R275.2m in 2016.
In the majority of death claims (1 784) rejected in 2017, insurers detected that fraudulent documentation had been submitted.
A total of 1 025 funeral claims worth R34.9m were rejected in 2017, mainly due to misrepresentation and material non-disclosure, as well as fraud.
In 2016, there were 11 302 irregular funeral claims worth R168.3m.
Life insurers have reported a number of cases where funeral cover was taken out under the pretence that the person concerned was a family member of the policyholder.
Misrepresentation and material non-disclosure by policyholders was by far the biggest reason for disability claims worth R516.5m being declined in 2017.
Herman says policyholders are often tempted to not disclose existing health conditions with the aim of securing lower premiums.
Hospital cash plans
Strict measures introduced by life insurers a couple of years ago to curb the abuse of hospital cash plans continued to pay off.
A total of 989 claims worth R6.1m were declined, compared to 2016, when 1 047 claims worth R8.5m were rejected.
Retrenchment benefit claims
Dishonest and fraudulent retrenchment claims increased from 74 in 2016 to 126 in 2017. The total value of these claims amounted to R3.6m in 2017, compared to R2m in 2016.