According to the Insurance Fraud Bureau Australia 2018, insurance fraud is estimated to cost the economy up to $2.2 billion every year. Fraudulent insurance claims ultimately cost everybody who takes out insurance, directly impacting premiums for honest policyholders.
While some instances of insurance fraud are deliberate, in many cases insurance fraud is committed without the person even realising. While it may seem that these costs will only impact the insurance company that has to pay out, the consequences of insurance fraud are far more widespread. When the insurance company has to pay out, costs are transferred to policyholders in the form of higher premiums, higher excesses, or more policy exclusions.
As such, it is important to take all the steps you can to ensure your insurance is up to date and you’re not inadvertently committing fraud.
What Types of Insurance Fraud are There?
Deliberate: Deliberate fraud is a calculated act that has been planned in an attempt to deceive the insurer. For example, if policyholder deliberately sets fire to their own property, or fakes a theft in order to receive a payout from the insurer.
Exaggeration: In this case, the policyholder does have a legitimate claim, however they deliberately exaggerate the amount of damage caused or the costs of the loss in order to get a higher payout.
Non-Disclosure: Non-disclosure means that the policyholder has not given full and complete information to the insurer, which may affect their decision to insure or pay out a claim. This can be deliberate or accidental. For example, if you are insuring a company vehicle, you may neglect to mention, or be unaware of the driver’s previous convictions.
How to Avoid Committing Insurance Fraud
Insurance companies across Australia and New Zealand are dedicating significant resources to combatting insurance fraud. Many insurers are using new technology and software to identify insurance fraud, along with providing specialist claims training to identify fraud and engaging with specialist investigators. Furthermore, the Insurance Fraud Bureau of Australia is working closely with insurance companies to provide them with information relating to possible insurance fraud to aid any investigations.
If you are deliberately committing insurance fraud, it’s important to be aware of the risks that this involves, and the fact that you are likely to be caught out sooner or later. In order to avoid accidentally committing insurance fraud, here are a few things you can do:
- Be Honest: Always give accurate figures and report facts. Don’t inflate the value of something or exaggerate the extent of damage.
- Give Full Information: Particularly in the event of a claim, it’s vital to make sure you tell your broker or insurer anything that you think may potentiallybe relevant.
- Read your PDS: Your PDS outlines the things that can make your insurance void. By knowing what these things are, you can make sure you avoid doing them.
- Read Your Duty of Disclosure: Your insurance broker will provide you with a Duty of Disclosure that will outline key information that should always be disclosed to your insurer.
Navigating your business insurance can be confusing. Speak with your insurance adviser if you have any queries about your policy and the details you have provided to your insurer.