Abstract
LL.D. (Insurance Law)
Insurance fraud is a major issue in the insurance industry. Insurance companies around the world
are all facing significant losses due to the prevalence of fraudulent claims. These fraudulent claims
and subsequent losses suffered by insurers inevitably lead to a dilution of the insurance pool and
result in other policyholders bearing the brunt of these losses. The inevitable solution for insurers is
to hike the premiums for all other policyholders in order to compensate for their losses caused by
fraudulent claims.
Insurance fraud is an international problem and it is common for insurers in most jurisdictions to
use forfeiture clauses. These clauses aim to protect the insurer by stating that if the policyholder
should submit any type pf fraudulent claim, the policyholder will forfeit the entire claim. There has
been much controversy around the validity and fairness of these clauses.
This thesis seeks to provide an overview of the prevalence of fraudulent insurance claims in South
Africa, England, Australia and New Zealand. Moreover, it will consider the fairness of forfeiture
clauses in light of the fundamental movement towards policyholder protection in recent years both
in South Africa and in those jurisdictions that form part of the comparative study.
The thesis concludes that forfeiture clauses form an indispensable part of short-term insurance
contracts and are justifiable and therefore lawful. It is, however, submitted that insurance
companies have a duty to disclose the nature and extent of forfeiture clauses at the inception of the
policy and again at claim stage. By using so-called staggered disclosure, insurers provide
policyholders with the opportunity to consider their claim and the means with which to prove it in
order to avoid instituting a fraudulent claim. The thesis recommends that these rules pertaining to
staggered disclosure should form part of the 2018 Policyholder Protection Rules, together with a
statutory definition of insurance fraud.