Tell the truth! ‘Little lies’ have big consequences

8 August 2018

Think twice before you inflate your insurance claim, says Insurance & Financial Services Ombudsman, Karen Stevens. “A ‘little lie’ can have big consequences.”

A Christchurch man produced five fake invoices (totalling $91,500) for D.I.Y repairs on his earthquake-damaged home. Later, when questioned, he admitted the invoices were falsified, but he denied it was fraud. He said he’d done the work with his own time and money, and, having no receipts, the invoices were the only way he could be reimbursed. His claim was declined, no further payments were made under his ongoing claim for earthquake damage, and his policy was cancelled. The IFSO Scheme didn’t uphold his complaint.

“The evidence required for insurers to prove insurance fraud is strong, and this case ticked all the boxes. The insurer could prove the man made a deliberately false claim to gain a greater benefit than he was entitled to.”

“The long-term consequences of insurance fraud are hard hitting. Declined claims are the tip of the iceberg,” says Karen. “If your insurance policies are cancelled, and your name is listed on the Insurance Claims Register (ICR), this makes it difficult to get future insurance, which can be devastating, for example, if you’re trying to buy a house.”

“The bottom line is, tell the truth,” says Karen. “Your claim, and your evidence, will be checked. We’ve seen some creative, quite elaborate storytellers get caught out.”

For example, a man claimed his van had accidentally caught fire, because a petrol can had been knocked over during a “sort of a romantic meeting” on a mattress in the back. He said he’d later attempted to light a cigarette outside the van and “there was a boom”. The insurer had strong evidence to prove the claim was fraudulent: petrol was everywhere in the van; the fire service had been called 38 minutes after the fire began; and the man had been trying hard to sell the van.

There are varying degrees of dishonesty, and the law recognises a difference between a fraudulent claim and a false or dishonest statement in support of what would otherwise be a valid claim. “But the consequences for both fraud and dishonesty are more serious than most people think. When we investigate complaints involving dishonesty, false statement or fraud, we look at the policy, and whether the insurer has been able to provide evidence to the legal standard.”

The following points are from IFSO Scheme complaints.

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 just wanted 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, cell phone, and jewellery, she provided photos as proof of the ownership. During the insurer’s investigation, metadata showed that the photos were taken with the allegedly stolen camera and cell phone 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
In the Christchurch fake invoice case, the insurer not only declined the claim and cancelled the policy, 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.