Most of us wouldn't dream of making a false insurance claim but for some, it can be a tempting way to make some money. Unfortunately, it's the people who pay their premiums who suffer as it can often lead to an increase in the cost of insurance.
Luckily, there are lots of ways that insurance companies can spot insurance fraud and stop these fraudulent claims from increasing prices.
The lengths people go to for a quick buck
Recently, a US man filed for a $2.2 million insurance claim for his multi-million dollar luxury car, a Bugatti, which he crashed into a bay in Texas. He told authorities that he swerved into the water after looking at his mobile phone. His plan may have worked if it hadn't been for a passer-by who recorded the whole thing on their mobile phone. It turns out the man had deliberately driven his car into the water and left the engine running so it was totally destroyed. Due to the video of the incident, which went viral, his plan backfired and he now faces 20 years in a federal prison for insurance fraud.
This is an extreme example but there are a number of smaller scale activities people do that are in fact fraud. Purposely overestimating the cost of tools so more money is received at claim time or falsely saying that an expensive tool has been stolen are examples. This type of behaviour, while clearly dishonest, also costs you money because it drives up premiums. It is estimated that 10% of all general insurance claims are fraudulent and it costs the industry $2 billion every year.
How to pick the dodgy claims
There are a number of things that an insurer looks for if they suspect an insurance claim may be fraudulent.
- Large claim early in the new policy - If you take out a new policy and almost immediately decide to put a claim in for an expensive piece of machinery, this can raise a few eyebrows and result in the insurer investigating.
- Check the story out - If an insurer suspects you may be faking an injury which prevents you from working, they make take measures to make sure your story adds up. This could include something as simple as checking your Facebook page to make sure you're not skydiving if you're off work with a bad back.
- Look at claims history - If you have a pattern of making certain types of claims, an insurer may take a closer look if they think it's more than just bad luck.
These are just some of the ways that insurers check claims to make sure they are legitimate. Of course, the majority of people are honest when claiming and these measures are simply in place to ensure that the cost of insurance doesn't rise because of false claims. Many insurers also receive phone calls from individuals who are aware that a claim is false and wish to report it.
If you would like to discuss your insurance needs, contact All Trades Cover or fill in our easy online enquiry form. At All Trades Cover, we specialise in offering insurance to tradies and offer a professional and friendly service.