Africa-Press – South-Africa. Insurance fraud has become increasingly organised and technologically advanced in South Africa, and it has the potential to cost local insurers billions.
Santam’s head of business integrity, Jerry Chetty, explained that fraudulent claims have a far-reaching knock-on effect.
“Insurance fraud is a criminal offence, and those who submit false claims face criminal prosecution and could end up with a criminal conviction against their name,” he said.
“Beyond the legal consequences, however, insurance fraud undermines the integrity of the community, diverts scarce police resources, and impacts the financial health of a critical industry.”
Insurance fraud schemes have become increasingly complex and can involve anything from impersonation and social engineering to leveraging generative AI and large-scale data breaches.
Global fraud losses totalled an estimated $1.03 trillion in 2024, while South African insurers face potential losses of up to R3.5 billion.
Chetty explained that, as fraud schemes become more complex, South African insurers have had to adopt stricter claim validation processes.
This makes insurance claims more complicated to address and negatively impacts legitimate claimants.
“Legitimate claimants now face longer processing times, more paperwork, and added stress as insurers work to verify the authenticity and quantum of each claim,” he said.
The insurance industry is becoming particularly vulnerable to fraud as technological advancements shift the industry to become more digital.
This means a growing and interconnected web of cyber and financial crime directly affects the insurance industry.
“As the world shifts towards digital and cashless transactions, we must be equally agile in how we detect, prevent and respond to fraud,” Chetty said.
“Our approach cannot be reactive or piecemeal. We need coordinated, cross-sector collaboration and continuous investment in technology.”
From a fiduciary standpoint, he explained that insurers have a duty to protect the funds entrusted to them by honest policyholders.
“But with the rising prevalence of fraudulent claims, that responsibility now demands significant investment in technology, analytics, and human capital.”
Fighting fraud in the digital age
Chetty explained that the fight against insurance fraud has become a digital arms race. Since fraudsters now have access to powerful AI tools – many readily available on the dark web – insurers have had to adopt similar technologies to combat this.
For example, Santam is deploying AI and advanced data analytics to detect suspicious trends and behavioural anomalies.
Chetty explained that this includes overlaying transactional data with behavioural patterns, like identifying clients who submit multiple claims in a short period or who follow known fraud patterns.
“We’re also seeing success in flagging anomalies using image recognition and deepfake detection technology,” he said.
Fraudsters use these tools to create synthetic identities, fake images and videos, clone voices, and script convincing phishing and smishing scams. “Impersonation is one of the fastest-growing threats we’re seeing,” Chetty said.
“It often begins with a simple phone call or email, but is now bolstered by AI tools capable of replicating writing styles, creating realistic imagery, and cloning voices.”
“This makes it far more difficult for individuals – and even businesses – to spot red flags.”
Another type of digital fraud is social engineering attacks, which exploit human behaviour rather than technical vulnerabilities.
Chetty explained that criminals use stolen data to craft highly convincing messages or scenarios, coaxing victims into revealing further personal information. They then use this information to commit fraud, often across multiple institutions.
Often, a data breach will be the first step in a strategically orchestrated string of fraudulent activity.
“Once the necessary information has been exfiltrated, identities are synthesised, and claims are submitted using false or manipulated documentation,” he said.
However, some positive signs are emerging, particularly regarding public sentiment, with Santam noting a growing intolerance towards insurance fraud.
“Where it was once seen as victimless, a low-risk, high-reward crime, there is increasing awareness of its seriousness,” Chetty explained.
“Submitting a false claim isn’t clever – it’s criminal. Community Police Forums warn communities about the legal consequences of submitting false insurance claims.”
“As insurers, we want to pay legitimate claims as quickly and efficiently as possible. But fraud complicates this. More checks mean more time, more resources, and more friction for everyone involved.”
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