Introduction
An insurance claim is considered fraudulent when it is based on:
- Facts that are simply untrue, such as an incident which never took place, or was
orchestrated (ie. arson),
- A genuine loss but is grossly exaggerated.
Non-Disclosure
One of the most common forms of insurance fraud is non-disclosure at the time a policy is
taken out. This causes the insurer to accept business which would otherwise be rejected,
or to underrate the risk.
Examples include:
- A policyholder may say he/she has security installed but has none
- A policyholder fails to reveal his/her full claims history
- A policyholder fails to disclose past convictions
Non-disclosure may either be innocent (an oversight) or fraudulent. It is usually
detected at the time of a claim and may lead to the claim being rejected.
The Insurance Council of Australia estimates that non-disclosure is represented in 20
percent of policies underwritten.
Key Facts
- According to a survey of New Zealand general insurers undertaken by the Insurance
Council in 1998, insurance fraud costs New Zealanders a conservative $62 million annually,
or $62 per household.
- More than 15 percent of all claims probably have an element of fraud associated with
them. Contents and travel insurance policies are the most attractive targets for fraud,
with health and motor insurance following closely behind.
- Attitudes to fraud among New Zealand policyholders in 1996, found that four out of five
people had heard of insurance fraud and one in five personally knew someone who had put in
a false or exaggerated claim.
- Seven out of ten policyholders considered all fraudulent claims to be serious, and 84
percent of policyholders understood that it was honest policyholders who lose when
insurance fraud is committed.
- The survey indicated there was a high awareness of what constitutes insurance fraud. 95
percent of policyholders agreed that "exaggerating a claim is dishonest and
represents fraud", and 93 percent agreed that "a false claim represents fraud
and insurance companies should encourage prosecutions".
- 76 percent of policyholders surveyed said they would like to see insurance companies
publicise the results of serious fraud cases.
