How rising insurance fraud is reshaping the industry in South Africa

IOL News

08-05-2025

Explore the growing threat of insurance fraud in South Africa, its implications for insurers, and the innovative technologies being deployed to combat this rising tide.
From impersonation and social engineering to leveraging generative AI and large-scale data breaches, insurance fraud has become increasingly organised and technically advanced. Global fraud losses totaled an estimated US$1.03 trillion in 2024, while South African insurers face potential losses of up to R3.5 billion.
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. 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.
As fraud schemes become more complex, South African insurers have had to adopt stricter claim validation processes. Legitimate claimants now face longer processing times, more paperwork, and added stress as insurers work to verify the authenticity and quantum of each claim.
From a fiduciary standpoint, 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.
At Santam, we're deploying AI and advanced data analytics to detect suspicious trends and behavioural anomalies. This includes overlaying transactional data with behavioural patterns. For example, 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.
The fight against insurance fraud has become a digital arms race. Fraudsters now have access to powerful AI tools – many of which are readily available on the dark web. These tools are used 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. 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.
Social engineering attacks exploit human behaviour rather than technical vulnerabilities. Criminals use stolen data to craft highly convincing messages or scenarios, coaxing victims into revealing further personal information. This information is then used to commit fraud, often across multiple institutions.
In many cases, 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.
We are seeing a growing intolerance towards insurance fraud, which is crucial to restoring trust in the system. Where it was once seen as victimless, a low-risk, high-reward crime, there is increasing awareness of its seriousness. Submitting a false claim isn't clever – it's criminal. Community Police Forums are warning communities about the legal consequences associated with 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.
Due to improving technological advancements, the insurance industry is directly affected by a growing and interconnected web of cyber and financial crime. As the world shifts towards digital and cashless transactions, we must be equally agile in how we detect, prevent, and respond to fraud.
Our approach cannot be reactive or piecemeal. We need coordinated, cross-sector collaboration and continuous investment in technology. Most importantly, we must foster a culture of integrity – one where false claims are not just illegal, but socially unacceptable.
As fraudsters evolve, so too must the insurance industry. By combining behavioural analysis with cutting-edge technology, and by raising awareness among policyholders, we can help safeguard South Africa's insurance industry – and the honest people it exists to protect.
* Chetty is the head of business integrity at Santam.
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