Gauteng Business News

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INSURANCE: Employee Awareness Reduces Fraudulent Benefit Claims


Recent Gauteng Business News

Creating awareness amongst employees can reduce opportunities for fraud syndicates and crooked employees to commit fraud – reducing the costs of benefit scheme contributions for all. After all, the ultimate victims of fraudulent employee benefit claims are fellow employees who see their fund contributions increased to make up for the cost of fraud.

“As criminals become more adept at manipulating company benefit schemes, employers need to help their employees understand the system, prevent fraud and successfully access their benefits – without becoming unsuspecting pawns in larger fraud networks” says Liezel Botha, Claims Manager at Alexander Forbes Life.

One method used by fraudsters is to get a fraud syndicate member to use false ID documentation to apply for a job at a company which provides group life benefits. The employee then vanishes and his supposed dependants notify the company that the employee has died. The ‘dependents’ then produce a fraudulent death certificate matching the false ID. In this way the company is tricked into submitting a death claim to their insurer for what they believe is a valid claim.

Disability claims are also prone to fraud. This happens where “the employee who is initially assessed as being disabled by an insurer subsequently becomes partly or permanently economically active without notifying the insurer as required” explains Botha. When the insurer reviews the claim some time later, the claimant intentionally misrepresents information about their health and employment status, in the hope that they continue to qualify for disability benefits in terms of the policy.

With fraud increasing across all classes of employee benefits, insurers now apply extensive processes to ensure that only valid claims are paid, and continue to be paid in the case of disability claims.

While this has saved employee benefit schemes millions, even more could be saved, and passed on to employees in the form of reduced contributions, if employers educate employees in identifying and reporting fraudulent benefit claims.

Simple steps that employers can take to help employees recognise that they might be unwitting participants in defrauding their company benefit scheme include:

1. Insuring that staff have only one ID. Dual or multiple IDs, or different ID numbers in the passport and ID book, usually indicate that something is wrong. IDs can easily be verified on the Department of Home Affair’s website which will confirm whether an ID number is valid, current or deceased, as well as the identity of the person that it officially belongs to. “Doing a quick check on all staff ID numbers could save the company scheme millions in fraudulently claimed or rejected benefits” advises Botha.

2. Ensuring that ID numbers match staff profiles. For example, certain number sequences indicate whether the holder of an ID is a male or female. “If the number sequences don’t match the gender of the employee then bells should go off” warns Botha.

3. Ensuring that the passport details of foreign employees correspond with the details that appear in their South African IDs or residence and work permits. If they don’t match up these employees will not be allowed to claim.

4. Reminding employees to protect themselves against identity theft. Employees should be vigilant with all their personal information, especially their ID documentation and any paper work that confirms identification. Personal documents such as bank statements and Telkom accounts should be stored securely or be shredded rather than thrown away.

5. Helping employees understand that if they misrepresent any information it will prevent them, or their dependents, successfully claiming any benefits that they would normally be entitled to – provided they qualify. “It is too late to try and correct information after the employee has passed away or become disabled” cautions Botha.

Unless employers begin helping employees understand the importance of submitting correct and consistent personal information, and back this up with administrative processes that eliminate missing, incomplete, duplicate or inconsistent employee data, the high rate of fraudulent benefit claims is set to continue.

Employees who knowingly continue to submit disability claims well after recovery, or continue to claim disability benefits while working for another company, for example, are committing fraud and will, any way, lose these benefits once this fraud is discovered – “though not before they have increased the costs of running the fund for everyone else” adds Botha.

Employees are often the first to realise that something is wrong, and should be encouraged to report this anonymously to their company or insurer’s whistle blower hotline.

In the end, the ultimate beneficiaries of getting employee data right and preventing fraud are employees themselves.

“Eliminating fraud from the employee benefit industry will reduce both employee and employer contributions while ensuring that deserving employees continue to receive employee benefits over the long term” concludes Botha.


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