Published: 20 May 2016
People caught trying to defraud insurers are never allowed to forget their transgressions, experts warned this week.
Petty criminals have their tracks covered by the Clean Slate Act, if they keep their noses clean. And bankrupts records vanish from their credit records four years after their bankruptcy ends.
But details of a person’s attempt at insurance fraud stays on the Insurance Claims Register (ICR) in perpetuity.
It’s one of the many things about insurance fraud many members of the public fail to recognise, says IAG’s fraud intelligence manager Natasha McFlinn.
The insurer has 25-strong team of fraud analysts investigators who investigate suspicious claims, and employs what McFlinn calls “military-grade” software to sift claims in search of tell-tale signs of fraud.
THE CONSEQUENCES OF GETTING CAUGHT
The first thing many people do not recognise is that the results of that can be devastating.
First their insurance policies with the insurer can be cancelled, and the insurer will log the facts on the ICR, which was set up in 1999.
When someone with a red flag on the ICR tries to get insurance elsewhere, they may find they cannot.
Not being able to insure a house means potentially not being able to get a mortgage. If you have a mortgage, allowing it to go uninsured is a “default” under the mortgage contract. A mortgage lender needs to be sure the security for the loan they have made is good.
McFlinn says: “People often underestimate the consequences of committing insurance fraud.”
“If you are flagged in the ICR for fraudulent activity, it’s unlikely you’ll be able to get insurance again which could cause serious problems if you’re trying to buy a house and need insurance to get a mortgage.”
It’s potentially a life-long punishment that can follow something as seemingly modest as adding an item to “padding” an insurance claim after a burglary, by adding an item to the list of things that were stolen.
The Insurance Claims Register is an industry initiative with no statutory limits on the length of time a red flag can remain on it. Insurers cannot take private prosecutions for attempted insurance fraud, so few get held to account that way. “It does happen, but it’s probably rare,” McFlinn says.
She says insurers have a good relationship with the Police, but they have other priorities than attempts to defraud an insurer out of $300.
YOU HAVE TO HELP INVESTIGATE YOUR CLAIM
The long-term consequences of being caught trying to rort an insurer is not the only fact that’s not appreciated, McFlinn believes.
People don’t realise they have contracted to help their insurer investigate them.
Each insurance contract contains a clause under which the policyholder agrees to assist the insurer in investigating claims.
State’s Home Comprehensive policy for example (State is an IAG brand) says the policyholder must: “give us any information or help we ask for”.
Refuse to help, and the insurer is likely to decline the claim, and cancel the policy.
YOUR DIGITAL HISTORY MAY BE SCRUTINISED
“We are seeing the use of technology in fraudulent insurance claims increase, particularly in the use of online market places to facilitate fraud,” McFlinn says.
There’s an increase in digitally forged documents being presented as proof of ownership, and the use of online marketplaces to sell goods that someone claims were lost, or to buy items second-hand people later claim were bought new.
McFlinn says: “Through online marketplaces some fraudsters seek to obtain a second-hand item cheaply and then claim they have had a brand new or higher model item stolen. Others try to sell unwanted items that they claimed were stolen and have had replaced via an insurance claim. We monitor sites like TradeMe closely to prevent and detect fraudulent activity.”
In an investigation, IAG’s fraud team may ask a claimant for their TradeMe username, and authorisation to look at their trading history.
INSURERS WILL SEE IT AS FRAUD
McFlinn says insurance fraud crossed demographics.
People caught padding claims include “highly-respected professionals and teachers”, she says.
Some seem to see it as a “victimless crime”, if they see it as a crime at all, she says.
McFlinn says: “There seems to be a mentality that they are entitled. They see insurance like an investment scheme. ‘I have been paying my premiums every year, and I’m entitled to something back!'”
But she says: “You certainly don’t accidentally commit insurance fraud.”
Sometimes, people’s clever schemes aren’t as clever, or well thought-through as they think.
“People aren’t as clever as they think,” McFlinn says.
IT’S RELATIVELY COMMON
McFlinn says 10 per cent of claims by number contain elements of fraud. Among commercial claims it is around half that, and around double for travel insurance claims. Those figures have not been externally verified.
The Insurance Council estimates, fraud adds around $350million to the cost of insurance each year.