Insurance fraud is a world-wide phenomenon, especially during times of economic collapse. The Insurance Council of New Zealand (ICNZ) launched its own fraud bureau last year, and, according to its 2019 data, $688 million out of the $1.31 billion in paid claims is estimated to have been a result of insurance fraud. “That number is expected to rise thanks to the COVID-19 pandemic and recession, and financial hardship is likely to be a key driving factor,” ICNZ reports.
“In terms of economic recessions, there are statistics available that show a direct correlation between a fall in economic output and a rise in fraudulent activity,” Stephen Dalton, an ex UK customs officer comments. “Fighting fraud and supporting consumers in hardship are two important ways to tackle this issue. As a global problem, it will be helped by insurers working together and sharing information. At the end of the day, making fraud harder to commit is a great outcome, and will help the insurance industry manage the ongoing cost of insurance,” the ICNZ advises.
The unprecedented financial pressure that consumers are under in 2020, “has certainly increased the frequency and quantum of the fraudulent insurance claims that we’ve picked up to date,” says Christelle Colman, insurance Expert at Old Mutual Insure. In response, the short-term industry is currently on, “high alert for fraud as Covid-19 financial pressures bite,” she adds.
She highlights a few areas where fraud often occurs:
|●||People often lie about the detail of the claim, adding a few items that weren’t lost – or increasing the quantum of claims by exaggerating the value of articles lost.|
|●||Another commonplace behaviour is to increase the value of the claim to compensate for the excess.|
|●||Instances where something is stolen or lost, claimed for, and paid out – and then the wedding ring is found, or the stolen car retrieved a few months later.|
“Whether sophisticated multi-million Rand crimes or smaller individual fraud involving people padding their claim or inadvertently increasing the value of claims, the point is there are systems in place to spot fraud,” warns Colman.
Click here to read Christelle Colman’s article.
Click here to read the New Zealand article.