Fraudulent insurance claim backfires

A man who made a fraudulent insurance claim for his car after the Auckland floods is now uninsured and could lose his house.

Fraudulent insurance claim backfires

Mikey* made a claim after the flooding event in Auckland on 27 January 2023 for damage to his car and provided a quote from a mechanic for the cost of repairs. However, rather than repairing his car, Mikey’s insurer wrote it off and notified Waka Kotahi NZ Transport Agency to deregister it, a standard practice in the insurance industry due to the safety risk posed by flooded vehicles.

Mikey then said he wanted to withdraw his claim, saying he had already fixed the car himself while waiting for the insurer to get back to him. He also said he needed his car to get to work.

His insurer investigated. They found that the mechanic’s assessment was from 13 January 2023, which was before the flooding event happened. They also reviewed the mechanic’s assessment and found that the damage was not consistent with damage caused by flooding; rather, it was more likely caused by wear and tear.

At this point Mikey refused to cooperate with the investigation, so the insurer declined his claim and put a flag on the Insurance Claims Register (ICR), noting the claim outcome. Mikey’s house and contents policies he held with another insurer were then cancelled due to the flag on the ICR.

Mikey wanted the flag to be removed from the ICR, so admitted to his insurer that he had lied about his car being damaged in the floods. However, his insurer just updated the flag on the ICR, changing the reason the claim was declined to fraud. Mikey is unlikely to be able to get insurance from any other insurer now, including for his house and contents, and faces the possibility of the bank withdrawing the mortgage because he can’t get insurance for his house.

Mikey made a complaint to the IFSO Scheme, saying his insurer lacked empathy because he was going to be ruined financially.

The IFSO Scheme found that because Mikey had deliberately misled his insurer, they could decline his claim in accordance with the terms and conditions of the policy. Insurers have clear policies regarding fraud, and it makes no difference if someone withdraws their claim or apologises for making a false statement. The IFSO Scheme could also not prevent the insurer from placing a flag on the ICR.

Complaint not upheld

Insurers have the right to cancel a policy and put a flag on the Insurance Claim Register if someone has deliberately misled their insurer. It’s vital for consumers to always tell the truth, as the consequences of not doing so are serious.

* Name has been changed

See the full case study.