Don’t inflate your insurance claim, says Insurance & Financial Services Ombudsman

Think twice before you inflate your insurance claim, as false statements and insurance fraud are more serious than most people think.

“Tell the truth when making an insurance claim,” says Insurance & Financial Services Ombudsman, Karen Stevens. “There is no doubt that insurers will check the information you give when they consider whether to accept your claim.”

There are varying degrees of dishonesty, and the law recognises a difference if someone makes a fraudulent claim, or makes false or dishonest statements in support of what would otherwise be a valid claim.

“But there’s no such thing as a ‘bit of a lie’ when it comes to insurance,” says Karen. “False information can not only result in a declined claim, but your insurance policies can also be cancelled, and your name listed on the Insurance Claims Register (ICR). This can make it very difficult to get further insurance, which can be devastating for people - like when they’re trying to get a mortgage.”

The IFSO Scheme has been resolving complaints for 21 years. “When we investigate complaints involving dishonesty, false statements or fraud, we look at the policy, and whether the insurer has been able to provide evidence to the legal standard. But some claimants ask to have their names removed from the ICR and, if they have committed fraud, we don’t have any say on that.”

The following points are from cases considered by the IFSO Scheme.

1. If you provide false information and then retract your statement, this does not change your original statement or the consequences

For example, after a woman made a claim for a pair of lost glasses, she then admitted the glasses were simply scratched and worn, and she said they were lost to make sure she had insurance cover. All of her policies were subsequently cancelled, and details of her claim are now on the ICR.

2. A statement has to be deliberately false for an insurer to prove fraud has occurred

When a homeowner made a contents claim for a stolen camera, cellphone, and jewellery, she provided photographs as proof of ownership. During the insurer’s investigation, metadata showed that the photos were taken with the allegedly stolen camera and cellphone after the date of the burglary. The entire claim was declined on the basis of fraud.

3. Insurers can decline a whole claim - not just the part you give false information about

When a Christchurch homeowner admitted using false invoices about house repairs, the insurer not only declined the claim and cancelled the policy, but they recovered the payments they’d already made under the ongoing claim.

4. If someone gives false information while making a claim under your policy, this will affect you

In a car insurance case, the insured’s husband tried to withdraw a claim as he had told a “bit of a lie” about being hit from behind by another car. But it was too late, and an alert was placed on the ICR against both the husband and wife, as they were joint policyholders.