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Insurance firms lose R4bn to fraud

Cape Town - Insurance fraud costs the short-term insurance industry an estimated R4bn a year, while organisations lose an estimated 5% of their annual revenues to fraud.

These are just some of the statistics emerging during International Fraud Awareness Week (from November 3 - 9).

The Association of Certified Fraud Examiners (ACFE) said organisations of all sizes and types are susceptible to fraud, which can have a measurable impact on their financial bottom line.

A report released last year by the ACFE found that organisations lose an estimated 5% of their annual revenues to fraud.

Short-term insurer Santam said on Wednesday that it has lost R7.3m to commercial crime so far this year. The 79 cases of commercial crime reported include insurance fraud, forgery or falsification of documents and theft.

Helen du Toit, Santam head of audit and forensics, said fraud is a real concern for the South African short-term insurance industry, which loses an estimated R4bn a year to fraud.

"Year on year we see statistics showing a continued upward trend in the number of commercial crimes reported.”

She said the two most prevalent types of insurance fraud are false and inflated claims.

Du Toit said that policyholders are blissful of the repercussions of their actions. Anyone who is found guilty of fraud can face the repudiation of their claim, criminal charges and cancellation of their policy, she said.

“While some people think adding a few rand to their claim is harmless, it does in fact constitute fraud.”

Professional services firm Deloitte said innovation is key in combating corruption and fraud.

"Companies and governments can only root out fraud and corruption if they employ innovative electronic tools," said Clayton Thomopoulos, director of forensic advisory and solutions at Deloitte South Africa.

He said risks must be identified and then measures must be put in place to plug the gaps.  

Deloittes, which developed a set of tools designed to expose the major fraud risks, said fraud detection technology is already a deterrent for potential fraudsters.

By harnessing the power of technology, entities can expedite the detection of fraud and mitigate losses, Thomopoulos said.

  - Fin24


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