Most people would never dream of stealing a TV, but every year average “law abiding” citizens add thousands of TVs to burglary insurance claims. Somehow these people disassociate themselves from the fact that what they are doing is a criminal activity. It is often justified as “I’m just getting my excess back” or “I pay my premiums, I’m entitled to get something back” and “Everyone else does it”.

They have the belief that the insurance company is some faceless corporate making lots of money off average Kiwis.

But the reality is that fraudulent claims cost the New Zealand insurance industry more than half a billion dollars every year, international research suggests that premiums are at least 10% higher because of fraud.

What Is Insurance Fraud?

Insurance fraud is deceiving your insurer. It can be small like inflating an existing claim, or big like arson. Some common examples we see are:

• saying you’ve lost something you haven’t

• pretending something broken was newer than it actually was

• combining multiple claims into one claim to avoid paying an excess for each event

• lying that pre-existing damage was caused by a natural disaster

• deliberately destroying something and claiming it was an accident

• claiming for items you’ve never owned.

The financial impact of these activities falls on policyholders as a whole, raising the cost of all premiums – but what are the risks if you lie or embellish the truth to your insurer?

The Possibility Of A Denied Claim

If you make a claim and your insurer realises that you lied to them, they are within their rights to deny the claim. For example, if you are the victim of a burglary to your main residence and you claim something was stolen that was not, the insurer can deny your entire claim.

Insurance Policies Could Be Voided

Aside from your claim being denied by your insurer, you could also find yourself with a voided policy. If you are dishonest with the insurer, then you are essentially breaking your policy contract. In response, the insurer can cancel your coverage, and not just for the policy that is the subject of the claim – effectively firing you as a customer and forcing you to look elsewhere for all of your insurances.

Problems Finding Insurance In The Future

When applying for another insurance policy, you have a duty to disclose if you have ever had a policy cancelled, or a claim declined. Lying at this point would make matters worse, as your fraudulent behaviour will have been recorded in the Insurance Claims Register. A new insurer is unlikely to want a customer who has made fraudulent claims in the past.

Ongoing Consequences

Lying about a claim on your car doesn’t just make getting car insurance difficult, it could also affect your ability to obtain a mortgage. Banks will not provide mortgages without insurance on the home.

So if you’re uninsurable, you will also struggle to become a homeowner. This also applies to current vehicle loans and mortgages, not just new ones. Explaining to your partner that you can’t buy a home with them because you ripped off your insurance company could be a very awkward conversation.

Legal Action Could Be Taken

Insurance fraud is a criminal offence, and your insurer may refer you to the Police to take legal action against you. Prosecution could result in fines and imprisonment.

Honesty Is The Best Policy

The phrase “honesty is the best policy” describes how you should approach insurance, and most people live by this. Save embellishing a good story for your next BBQ, where exaggerating the size of the snapper you caught won’t get you in so much trouble.