Some consumers feel they have a “right” to lie on their insurance claims, but that can prove to be a costly mistake, the Insurance and Financial Services Ombudsman says.
Karen Stevens said dishonesty was a serious problem for insurance companies. It has been estimated that insurance fraud worth $150 million to $250m a year happened in New Zealand, or up to 10 per cent of all claims.
Sometimes after a burglary they would add other items to the claim. She had seen cases where people had submitted a quote as proof of purchase, or upgraded their TV from a 30-inch model to a 50-inch model when they asked for it to be replaced.
“That’s really common. Sometimes there might be questions over the value of things.
“Some think they’ve paid their premiums for a long time, this might be the first claim they’ve ever made, they want to make the most of it., But if they understood that by telling any sort of lie they are in effect putting paid to the claim, they might think twice about it.”
Stevens said sometimes people lied about something such as the cause of a car accident, because they were concerned about what an insurer would say. But if they had not lied, the claim would have been paid.
Insurance companies often use private investigators to examine claims they think might be fraudulent. Stevens said many people admitted the lie at that point, but it was too late.
“Claims are declined, and the flow-on effects include cancelled policies and names registered on the Insurance Claims Register – and this can affect any future insurance which, in turn, can affect home or business ownership.”
Once on the register, names are never removed, which can make it impossible to take out a new policy.
Most banks will not lend a home loan on a property without insurance.
Stevens said her office received a number of complaints from people who had their claims rejected because of dishonesty.
In one case, a Christchurch resident said the amount EQC paid him out for his damaged Christchurch house wasn’t enough to cover the repair work he’d had done before the house was further damaged.
He provided repair invoices in the names of five different people totalling $91,500, but he later admitted he’d written the invoices himself as he had done the repair work and didn’t have invoices.
His claim was declined on the basis of fraud, his policy cancelled, and the insurer sought to recover the payments it had already made.
There were also cases that related to other types of insurance – in one, a man claimed on his income protection cover after he suffered Guillian-Barre syndrome. Specialists suggested he go through a rehabilitation process back to work.
He was asked to fill in a daily activity diary for the insurer. But it was concerned he was not properly reporting what he was doing and hired an investigator, who found he went to his former workplace each day.
The insurer cancelled the policy and stopped making payments on the claim.
Their complaints to Stevens’ office were not upheld.
When investigating complaints involving fraud or dishonesty, Stevens’ team looked at the policy, and whether the insurer had been able to provide evidence to the legal standard.
“Some claimants ask to have their names removed from the Insurance Claims Register,” Stevens said. “But if the insurer has correctly declined the claim or avoided the policy, we can’t give claimants what they want and it will affect their future insurance.”