The world is currently facing one of the harshest economic climates experienced since the 2008 Global Financial Crisis, one of the worst financial crises in modern history. This raises concerns that more people may turn to fraud to address the financial pressure they are experiencing.
“Rising inflation and the current war in Ukraine are two major contributors to an increasing cost of living crisis. This is putting many people in a difficult financial position; reports out of the United Kingdom show that people are increasingly considering turning towards fraud to relieve this pressure,” says Manie van Schalkwyk, CEO of the Southern African Fraud Prevention Service (SAFPS).
Recent International Fraud Tactics
Research by the Insurance Fraud Bureau (in the UK) points out that as many as one in four young adults now say they would ‘likely’ consider an act of insurance fraud if they were struggling financially, which is a marked increase when compared to the same survey results taken last year.
The 2023 survey found that if struggling financially, one in four (27%) 18-24-year-olds would think about lying on an insurance application to save money. Insurance fraud to make money is also a growing tactic. The Insurance Fraud Bureau points out that one in five (21%) 18-24-year-olds would consider lying on an insurance claim to make money; this statistic was one in seven (14%) in 2022.
The research points out that, across all age groups, one in ten people said they would consider making a fraudulent insurance application or claim if struggling financially. Nearly two in every five (38%) respondents also said they felt financially desperate, specifically due to the impact of the cost-of-living crisis.
Will These Stats Be Replicated in South Africa?
Garth de Klerk, CEO of the Insurance Crime Bureau (ICB), points out that while the ICB does not have access to the same kind of information that the Insurance Fraud Bureau does when it comes to the likelihood of insurance crime increasing within specific age groups, he points out that the ICB is aware of the current economic climate and the overall impact that it has on the insurance industry.
“While we don’t keep the same kind of statistics as to the profile of offenders in South Africa, it is fair to say that there probably is an increase in the same age brackets where youngsters are feeling economic pressure and unemployed.
If you have a look at the unemployment rates in South Africa, they are very high in the age brackets discussed in the Insurance Fraud Bureau statistics,” says De Klerk.
Particularly Concerning
Van Schalkwyk points out that this is particularly concerning considering the purpose of insurance.
“Insurance is supposed to be a layer of protection for individuals who want to ensure they will be covered should they face a financial loss. Abusing this compromises insurers’ trust with their clients who enter into these contacts based on good faith. We don’t want to get into a situation where insurers will look at every claim with increased scrutiny because of the actions of a handful of dishonest individuals,” says Van Schalkwyk.
He adds that there is also the possibility that this could be a gateway crime to increase the prevalence of money muling.
SAFPS’ Most Essential Service – Protective Registration
Protective Registration is a free service protecting individuals against future fraud. Consumers apply for this service, and the SAFPS alerts its members to take additional care when dealing with that individual’s details.
Protective Registration provides an added layer of protection and peace of mind regardless of whether the applicant’s identity has been compromised.
An Empowerment Platform
It is not only insurers who are becoming victims. The public has become victims of scams in the past where scam artists pose as representatives from the consumer’s insurer and scam people out of significant amounts of money. In response to the growing nature of scams, the SAFPS has launched YIMA, which is proving to be an effective tool.
Yima’s priority is to provide the consumer with support before and after they fall victim to fraud and scams.