What is insurance fraud? Will it lead to your policy being cancelled?

There’s no such thing as a “bit of a lie” when it comes to making an insurance claim. Be warned…

Were your sunglasses stolen – or did you simply want a new pair? Did you really have quite that much jewellery stolen? Was that camera really lost? Are you sure you didn’t overinflate that home repair bill?

If you’re putting in an insurance claim these are just a few of the questions you may face. And if you’re found to have exaggerated your claim, expect to have it denied and for your insurance policy to potentially be cancelled!

According to the Insurance Fraud Bureau of Australia, insurance fraud costs up to $2.2 billion each year – a cost that is borne indirectly by other policy holders. Insurance Fraud can include the exaggeration of otherwise legitimate claims, intentional misrepresentation of the facts or complex organised manipulation of the claims process to gain a financial advantage where there been no actual loss.

The most common form of insurance fraud is the exaggeration of personal claims – this is referred to as Opportunistic Fraud.

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There are varying degrees of dishonesty, and the law recognises a difference if someone makes a fraudulent claim, or makes false or dishonest statements in support of what would otherwise be a valid claim. But at the end of the day there’s no such thing as a ‘bit of a lie’ when it comes to insurance.

What do people lie about on their insurance claims?

It happens across the Tasman as well; consider the following cases considered by the New Zealand Insurance & Financial Services Ombudsman scheme

1.  Sick of your sunnies…

After a woman made a claim for a pair of lost glasses, she then admitted the glasses were simply scratched and worn, and she said they were lost to make sure she had insurance cover. All of her policies were subsequently cancelled, and details of her claim are now on the ICR.

2.  Inflated invoices…

When a Christchurch homeowner admitted using false invoices about house repairs, the insurer not only declined the claim and cancelled the policy, but they recovered the payments they’d already made under the ongoing claim.

3.  What’s your partner up to?

In a car insurance case, the insured’s husband tried to withdraw a claim as he had told a “bit of a lie” about being hit from behind by another car. But it was too late, and an alert was placed on the ICR against both the husband and wife, as they were joint policyholders.

4.  Smile and say “cheese…”

When a homeowner made a contents claim for a stolen camera, cellphone, and jewellery, she provided photographs as proof of ownership. During the insurer’s investigation, metadata showed that the photos were taken with the allegedly stolen camera and cellphone after the date of the burglary. The entire claim was declined on the basis of fraud.

Digital ability increasing fraud

According to insurer IAG, technology is changing the way crime is committed – including insurance fraud.

“We are seeing the use of technology in fraudulent insurance claims increase, particularly in the use of online market places to facilitate fraud,” said Natasha McFlinn, IAG Fraud Intelligence Manager.

“Digitally forged documents have been around for some time but we are seeing an increase in them as people’s familiarity with digital technology increases.”

In some claims, fraudsters pretend to own items claimed for that they’ve never owned using computer technology to suggest evidence of ownership.

Meanwhile, online spaces have also become a popular destination for fraudsters.

“Through online marketplaces some fraudsters seek to obtain a second hand item cheaply and then claim they have had a brand new or higher model item stolen. Others try to sell unwanted items that they claimed were stolen and have had replaced via an insurance claim.”

Do you have enough insurance anyway?

Definitely don’t make a false or misleading insurance claim – but do check that you have enough insurance so that if anything does (legitimately) go wrong, you’re covered. You can compare home and contents insurance policies here and compare car insurance policies here.

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