Sithembile Happiness Xulu, 48, a Gauteng nurse and gardener, is pleading not guilty to all charges related to the murder of her domestic worker, Busiswa Nxumalo, in 2022. The pair, who are facing three counts of fraud, murder, and defeating the ends of justice, are accused of orchestrating the murder.
Xulu, a nurse at the Alberton Clinic in Ekurhuleni, and her co-accused gardener, Simon Mogale, 37, are facing charges of murder and defeating the ends of justice. Nxumalo was found dead at a dumpsite near her previous home in Lenasia South, with her throat slit. Life policies with three different insurance companies were taken out in her name but were frozen on fraud suspicion.
Nxumalo's uncle Njabulo claimed that the nurse had told the family that his niece was killed by an angry community who accused her of being troublesome. Njabulo alleged that one of the insurance companies in Durban informed him that Xulu allegedly received about R700,000 in funeral policies from different banks.
Insurance fraud
Life cover fraud has become a significant issue in South Africa, with the case of former policewoman Rosemary Ndlovu being a prime example. The fraud has led to losses of approximately R77 million for life insurers and investment companies in 2022, but these companies were able to prevent losses amounting to R1.1 billion. Hollard Life Solutions, for instance, prevents losses of around R20 million annually from fraudulent claims, particularly on direct funeral and life policies.
Recent trends in life insurance fraud show newer ways of fraudulent activities, including individuals impersonating others when acquiring a policy, brokers altering beneficiaries' details, and manipulating death circumstances and police reports during the claims process. Criminals are also targeting vulnerable individuals, taking out life and funeral assurance policies, with the proceeds channeled back into illicit activities in cases of unnatural deaths, such as gang-related violence. This is costing the burial and life insurance industries billions of rands.
Funeral policies often impose waiting periods of up to six months for deaths due to natural causes, designed to deter individuals from taking out a policy once they are already sick and aware of their impending death. However, there are typically no waiting periods for claims related to unnatural causes. Hit-and-run schemes, where families stage unnatural deaths after their loved ones pass away naturally during the waiting period, have emerged as a growing insurance fraud trend. Mortuary employees have been implicated in selling unidentified bodies to syndicates in the funeral insurance industry, which are then used to file claims against policies obtained fraudulently, sometimes days or months earlier.
The purchase or rental of unclaimed bodies is another scheme, where employees of funeral parlours and mortuaries purchase deceased corpses in the funeral insurance market and sell or rent them to syndicates. These bodies are then used as collateral for policies that were falsely obtained several months prior. Paper children syndicates are another growing insurance fraud trend involving claims for children who have reached the maximum age for SASSA benefits. Late death registration for the assured life is another one of these schemes, often operating in rural areas, identifying deceased individuals who have not yet been officially recorded as deceased with the Department of Home Affairs.
Murder for money is a type of insurance fraud that is currently on the rise, particularly in the Eastern Cape, with policies being taken out between one day to three months ahead of the murder. Insurance companies are proactively implementing measures to deter fraudulent activities, including closely collaborating with law enforcement and regulatory agencies. In cases of actual loss, insurers work closely with the ICB, the Financial Intelligence Centre, and the South African Police Service to recover costs.
Both insurance companies and consumers play crucial roles in curbing fraudulent activities in the insurance industry. Insurance companies are responsible for implementing robust fraud detection measures and collaborating with law enforcement agencies and regulatory bodies to effectively combat fraud. Consumers have a responsibility to act ethically and honestly when interacting with insurance products, provide accurate information when applying for insurance, report any changes in circumstances that may affect their policy, and submit legitimate claims only. By working together, insurance companies and consumers can help reduce the prevalence of insurance fraud.
The number of fraudulent and dishonest life insurance claims in South Africa has decreased from 4,287 in 2021 to 2,618 in 2022, according to the Association for Savings and Investment South Africa (ASISA). However, these claims accounted for 29% of the total 8,931 cases of fraud and dishonesty recorded in 2022. Funeral insurance was the number one claim, followed by death cover, disability cover, hospital cash plans, and retrenchment/loss of income benefit cover. The rand value of these claims amounted to R770.5 million in losses prevented, with actual losses totaling R17 million. Most fraudulent and dishonest claims were in KwaZulu-Natal, Gauteng, the Eastern Cape, and Western Cape.
MiWayLife CEO Craig Baker said that a third of insurance claims have an element of dishonesty. Since 2020, MiWayLife and its forensic team found that 8% of claims contained cases of wilful misrepresentations and fraudulent claims. The Covid-19 pandemic has contributed to a rise in anti-selective behaviour.
Sales representatives across the industry can sometimes be lured into partaking in illegal activity, tricking members of the public into being involved in criminal schemes for financial gain. Be careful not to get caught in the web of illicit activity, even when the offer is lucrative and purported to be foolproof.
