Insurance Fraud: What You Need to Know
Insurance fraud costs New Zealanders around $62 million per year — that equates to approximately $62 per household. Insurance fraud is nothing new, but it is a serious problem. Both insurers and policyholders can commit fraud and when discovered, they are fined heavily and even imprisoned. If you are planning to take out an insurance policy, beware of the traps that might ensnare you and have you running for the assistance of an insurance fraud lawyer.
What is Insurance Fraud?
Insurance fraud is committed when an insurance company or insurance broker intentionally denies payment to a policyholder who is entitled to the compensation as stipulated in the person’s insurance policy. A policy holder (you) commits insurance fraud when inaccurate or misleading information is presented on an insurance claim. Insurance fraud isn’t confined to a specific type of insurance; people commit car, health, life and health insurnace fraud. Insurance companies hire insurance fraud investigators to help them uncover situations where fraud has or is currently taking place.
The Insurance Council of New Zealand keeps a register called the “Insurance Claims Register” (ICR). The ICR allows insurance companies to check the accuracy of the data submitted with policy applications and insurance claims.
The ICR is like a giant database of all insurance claims logged with participating insurance companies. The Insurance Council of New Zealand is comprised of 20 member companies, which account for 95% of New Zealand’s general insurance business. The member companies protect around half a trillion dollars in assets.
Participating insurance companies have access to the claims history of a client. This assists them when underwriting new business (evaluating the risk and price for the policy) and processing claims — for the specific purpose of checking for insurance fraud. This system works in a similar way to the credit reporting facility, Baycorp.
Some individuals have concerns around their privacy. Customers who object to this background check can always apply for insurance with companies not affiliated with the Insurance Council of New Zealand. Customers can also object to the information held on the Insurance Claims Register if the privacy disclosure was not on the renewal form or proposal. On the grounds of this objection, the company will not submit the information to the ICR.
Customers can obtain a copy of their information from the Insurance Claims Register and seek changes if warranted. Only authorized personnel from participating insurers have access to the information. Each insurer can access the ICR by using security passwords. Any access to information is registered and can be traced using electronic footprints.
Insurance fraud is also committed when an individual applying for insurance lies or withholds required information. Below are some basic examples of insurance fraud:
- Supplying false facts, incidents that never took place or reporting incidents that were intentionally orchestrated.
- Exaggerated claims or inflated values for lost or stolen articles.
- A policyholder fails to disclose his full medical history when purchasing a health insurance policy.
- A policyholder does not reveal previous rejections from other insurance companies.
- A policyholder omits information of past criminal convictions.
- It is also insurance fraud if the non-disclosure of facts leads the insurance company to approve an application when it would otherwise have been rejected.
Key Facts About Insurance Fraud
Insurance fraud is committed by insurance providers as well. Heath insurance fraud is committed by healthcare providers and car insurance fraud is committed by car maintenance service providers when astronomical bills are charged. If you suspect a service provider is inflating the repair or replacement costs, you should contact the Insurance Ombudsman or Insurance Council immediately.
Examples of Insurance Fraud
Here are several examples of the type of fraudulent claims insurance companies receive:
- Derek and Jodi faked Derek’s drowning to get $1,000,000 in life insurance cover. The scam was foiled by an insurance fraud investigator when it was discovered that Nicholson took out a life insurance policy just four days before the “fateful” incident. They were both convicted and were sentenced to five years imprisonment.
- John Magno of Toronto set his house on fire hoping to cash in on a $35,000 insurance policy. Fifty families had to be evacuated on Christmas morning of 2008. He is awaiting trial for arson and insurance fraud.
- John claimed damages to his ute claiming that he left it in a school parking lot overnight only to find extensive damage on the right side of his car when he returned in the morning. Insurance fraud investigations concluded that the damages were caused not by an impact but by repeated blows. His alibi didn’t stack up either. His insurance claim was declined and John now faces serious insurance fraud charges.
- A Nigerian national bought health and accident insurance before his trip to Nigeria. He filed two separate insurance claims. After the first claim was paid, the insurer was doubtful of the second claim because all details were identical. It was discovered after an insurance fraud investigation by an investigator that the policyholder never underwent any medical treatment. He was charged with insurance fraud.