Fraud in insurance can take on different forms and cost insurance companies millions of rands each year. Fraud can be defined as intentional lying, hiding or omitting the facts by policyholders to gain an unlawful or unfair advantage. This advantage is usually in the form of obtaining payments of insurance claims that would not have been made if the true facts or all the information were known to the insurer.

Fraud in insurance companies can also be as a result of its own employees, agents and brokers lying or misrepresenting the facts for financial gain.  If a policyholder wilfully commits fraud it is a criminal offence that carries severe penalties. If fraud is proven in insurance, the policy will be voided.

The onus will be on the insurance company to prove “on a balance of probabilities” in a civil case and “beyond all reasonable doubt” in a criminal case that fraud is present on a claim.

The type of insurance fraud can involve the following:

• Fabricated claims of a loss to enable the insured to claim.
• Intentionally exaggerating losses to claim more than the real value of the loss.
• Staged accidents or theft.
• Exaggerated injuries.
• Inflated medical bills.