How big a problem is insurance fraud?

Published: 10 December 2018

I don’t mean accidental non-disclosure, and I don’t mean accidental declines. Mistakes happen. What I am worried about is real fraud.

Russell Hutchinson

The simple fact is – we don’t know how much fraud is tried. Insurers and fraudsters share a fact – that it is in the interest of neither to reveal attempted fraud. Being too specific about dodgy claims can sometimes inspire others, or reveal too much about fraud detection processes.

So we do not have great data about frauds. It is much easier to pretend that it isn’t a big problem.

Hey, we caught this one. Or even, to assume that it was a mistake – of some kind.

But I know some private investigators that look into insurance fraud.

Fraud for general insurance dominates their work, but it would be unusual if the same motivations did not work their way into the odd personal risks claim.

Insurers, of course, sometimes talk about them. Very occasionally one makes the news – like the multiple fraudulent life claims made by a Rotorua woman last year.

But there is a good reason to raise the subject every now and then. Deterrence.

In the UK the ABI, insurers, and the Police have joined forces to try and tackle insurance fraud.

This report, focusing on general insurance, details how, in 2017 a total of 562,000 insurance frauds were detected by insurers. Of these there were 113,000 fraudulent claims, and 449,000 dishonest insurance applications.

This demonstrates how important it is to participate in the public debate about what is, or is not, acceptable behaviour. It is a deliberate decision to speak on behalf of honest policyholders and choose to protect their interests.

It is also in the interest of the wider community, because it helps to prevent fraud, rather than merely detect it when it has been committed. The problem cannot be assumed to be different in New Zealand, or different with personal risks insurance.

As Insurance and Financial Services Ombudsman Karen Stevens said recently “people still think that they have earned a claim through all the premiums they have paid.”

Leaving that view unchallenged allows the rationalisation for fraud room to expand, and eventually, become action.

Unfortunately, the default public relations advice in New Zealand has been to not say anything, and then to talk about the ‘positive claims stories’ that we all have.

This fails to acknowledge the reality that our positive claims stories – valuable though they are – are not of much interest to journalists. An insurer paying a claim is merely expected. An insurer denying a claim is far more interesting. But an interesting fraudster, caught, to protect the honest policyholders, that’s a pretty good story too.

The UK examples shows that the industry, together with law enforcement agencies, can make an effective case to deter insurance fraud. The full article is available at this link: