Buying corpses, cheating vulnerable drug addicts: Fake funeral claims surge during pandemic

Mortuary workers selling corpses and fake job scams to get ID numbers are among the criminal ways South Africans are trying to score from funeral policies.

The Association for Savings and Investment SA (Asisa) said on Monday the country’s life insurers reported a 12% increase in fraudulent and dishonest claims across all lines of risk business in 2020 when compared to 2019. This spans a range of claims including for death, disability, funeral and retrenchment.

Last year 3,186 cases of fraudulent and dishonest claims to a value of R587m were recorded, compared to 2,837 fraudulent and dishonest claims in 2019 valued at R537m. The highest incidence of fraud and dishonesty last year took place in the funeral insurance space, where a total of 2,282 claims were found to be fraudulent or dishonest.

Commenting on the statistics, Megan Govender, convener of the Asisa forensics standing committee, said the increase in fraudulent and dishonest claims is not surprising since tough economic conditions make it more tempting for dishonest policyholders and syndicates to try their luck in the hope of scoring sizeable insurance payouts.

Govender said while funeral insurance has always been seen as a soft target by fraudsters, the Covid-19 pandemic has made it worse. He said desperation due to job losses is driving more people to resort to crime while the pandemic has also resulted in a significant increase in deaths, which makes it easier to source dead bodies from flooded mortuaries for fraudulent claims.

“Since funeral insurance policies do not require blood tests and medical examinations and are designed to pay out quickly and without hassle, when an insured family member dies, criminals and dishonest individuals most commonly try their luck in this space,” she said.

Of the crooked claims detected, most were in KwaZulu-Natal (31%), followed by the Eastern Cape with 16% and Gauteng with 15%.

Govender said there have been several shocking incidents in recent months that illustrate how far some people will go to illegally access a funeral policy payout. Here are examples of fraud involving funeral policies:

'Hit-and-run' crime

Funeral policies impose a waiting of period of between six and 12 months on deaths due to natural causes to prevent people from only taking out a policy once they are sick and know they are probably going to die.

Govender said he has come across cases where families were so desperate for payouts from funeral policies that they orchestrated unnatural deaths after their family members had died from natural causes within the waiting period.

One family collected the body from the mortuary before the death was registered. The body was then purposefully placed in a road where it could be hit by a car. The family reported a hit-and-run accident and submitted a claim.

Buying bodies

Govender said fraud in the funeral insurance space often involves mortuary employees who sell bodies to syndicates who then use the bodies to claim against policies fraudulently taken out some months earlier.

“If funeral cover is taken out on someone who does not exist by submitting fraudulent documentation, the criminal will have to commit a further crime by either buying a body or murdering someone to enable them to claim. Buying an unclaimed body is usually the easier option.”

Exploiting addicts from poor communities

Govender said the life industry has picked up on a syndicate that targets drug addicts and alcoholics from impoverished communities and under the pretext of a job offer obtains their personal details, including banking details. These details are then used to submit fraudulent funeral policy applications.

In one case the syndicate then tried to murder the victim, she said. The victim managed to escape, and the syndicate moved to plan B to buy a body and submit a claim. The claim was marked suspicious by the life company’s claims department and submitted to the forensic department for further investigation.

Investigators found the person whose life was insured was still alive.

Govender said the same syndicate has also been responsible for other fraud cases and suspicious deaths.

Fraudsters will be nabbed, said Asisa, as life insurers have sophisticated fraud detection mechanisms using artificial intelligence and data.

“The chances of being caught are extremely high and the consequence is likely to be a lengthy prison sentence,” said Govender.

Legitimate claims

Policyholders and beneficiaries received claims and benefit payments worth R522.7bn from SA life insurers in 2020.

The life industry recorded 434,216 legitimate death claims in 2020, of which more than half were for funeral policies (266,321).

There was a 27% increase in death claims last year because of the Covid-19 pandemic.

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