Investigation of disability claims – an involved process.

In South Africa it is generally accepted that a disability claim can be broadly defined as a temporary or permanent impairment which results in the prevention of the policyholder to continue with his/her current occupation. It also prevents the policyholder to follow an alternative profession for which he/she is fitted by certain skills, expertise or training.

The reality is that disability products are frequently exploited by opportunists or fraudsters operating in syndicates, and it is therefore advisable to ensure that a high risk disability claim is meticulously investigated.

Risk factors when considering investigating disability claims

  • Investigation of disability claims can be expensive. Various reasons can contribute to this, for example, expensive medical records of the policyholder, certain private hospitals charge up to R3 000 for a set of records. In order to make an informed decision on whether to settle or repudiate a claim, a medical expert’s opinion is a useful tool but, unfortunately, an expensive one.
  • The culprit in the event of a fraudulent claim is probably the policyholder who is obviously trying to destroy certain evidence, jeopardise the investigation and manipulate the outcome thereof.
  • The turnaround time of the investigation can be lengthy because of the fact that it can take long before the history of medical information is obtained or released.
  • In certain instances, surveillance of the policyholder is necessary. It is a well-known fact that this can be a costly and lengthy process.

Is there a glimpse of hope?

Evidently, any repudiation of a disability claim will depend on the facts of the particular matter. However, there are several possible grounds for the repudiation of a disability claim.

A ground for repudiation will be when it is proven that there is an exaggeration of the disability and it is not as severe as alleged. Also, where it is proven that the policyholder is in fact in a position to adopt an alternative occupation which would result in more or less the same income as per his previous occupation, the claim can be repudiated. Often such repudiations expose fraud as medical proof for the disability is frequently forged. If it is possible to prove any form of self-inflicted action which led to the disability, the insurer will be in the position to repudiate a claim.

Expectations from insurers

  • Calculate and project costs for the investigation conservatively and accurately to avoid high costs.
  • Manage the policyholder’s expectations in terms of the duration of the investigation and obtain the policyholder’s consent before the kick-off of any investigation.
  • The investigator’s turnaround time, as well as all other third parties involved, must be managed on a daily basis.
  • A comprehensive pre-investigation, which includes an investigation into the policyholder’s employment history, medical history, perusal of sick leave records and interviews with friends and family of the policyholder, must be conducted to ensure a solid foundation of the investigation. The applicable policy terms and conditions should be carefully scrutinized as this will be the only legitimate map at the insurer’s disposal when conducting such an investigation.
  • Continuously remember that an opportunist or fraudster operating in a syndicate will be cautious and easily spooked. Therefore, do not act prematurely and ensure you know where the honey is beforehand.

Be aware of your surroundings

The Association of Certified Fraud Examiners (ACFE) reports that policyholders usually entertain fraudulent behaviour during times of financial hardship, when under peer pressure or when they believe they will be able to get away with it.

In order to protect your business, you need to be aware of all of the situations surrounding a disability claim. Reports from ACFE suggest that about 80% of all disability claims in the industry are fraudulent.