Even though the law discourages fraudulent insurance claims, South African insurers still have to protect themselves when it comes to fraud.
While the English courts apply draconian and deterrent laws to prevent fraud, South African law only disallows the portion of an insurance claim that is fraudulent. The valid part of a partially fraudulent claim is not automatically invalidated. The insurer’s remedy for fraud is an adverse costs order, a civil claim for damages and a criminal sanction (which has to be pursued through the already burdened criminal justice system).
With the insurance laws about to be amended, now may be an opportune time to incorporate a fundamental dishonesty clause similar to England’s section 45 of the Criminal Justice and Courts Bill.
Aside from legislative intervention, insurers must include fraud clauses, which have been successfully used in the industry.