We thought we would turn to something slightly different in this blog.
Insurance fraud; what is it?
Simply put; it is when an insured person claims from his/her insurance company for something that the insurer is not liable for; in terms of the insurance policy.
This may take many forms and also may amount to nothing more than padding your claim form with a few minor additional items that supposedly went missing, were stolen of lost to multi million Rand insurance claims for incidents that never took place at all; or insured items that never ever even existed. There is a great difference between the two; but they are both none the less unlawful claims; and may result in a criminal charge of fraud being laid against you.
Some may question whether it is wrong to add a few items to the list of items stolen in a housebreaking claim or to claim that it was in fact a licenced driver driving your car at the time of the accident and not your younger learner driver brother. Quite a few people practice selective morality when it comes to insurance claims. They claim very seldom and pay their monthly premiums regularly and do not see anything wrong in changing the details of their claim or padding it with a few additional items.
Most of the insurance fraud that is committed falls into the “soft fraud: category. This is where a genuine valid incident has occurred but where the facts of the claim are distorted by the insured. “Hard fraud” occurs when someone submits a claim for an incident that did not happen such as when they claim for the theft of a car; when so such incident took place.
A number of reliable surveys both here and overseas and reported in the press suggest that up to 18% of interviewees canvassed admitted that they had exaggerated short term insurance claims in the past and that they would do so again if the opportunity arose. This suggests that a large number of insured in the short terms insurance industry do not see anything morally wrong with doing so. Eighteen per cent believed it was “acceptable” to “pad” their claims by adding items; while 44% believed it was acceptable to overstate the real value of the items that had been stolen, lost or damaged.
Many of these claimants justify their actions based on an argument relating to the high premiums that they pay; and/or that the insurance companies, in their view, will look for reasons not to settle the claim in full and use these excuses as justification for their morality lapse in these insurance claim situations.
Insurance fraud costs the short term insurance industry in this country between R 2 billion and R 3 billion per year and this cost is passed on to us in the form of higher premiums that we have to pay to stay insured. The South African Insurance Association estimates that local insurance fraud is in line with international trends and statistics and that fraudulent claims amount to about 32 per cent of all claims submitted in any particular year.
This amounts to almost one in three insurance claims being fraudulent in one or more ways; and it is for this reason that insurance premiums are as expensive as they are. It is also the reason that short term insurance companies have become increasingly diligent in their research and investigation of almost every claim submitted to them.
In one sense therefore we only have ourselves to blame; as our lapse in moral judgment in submitting skewed insurance claims has resulted in the current situation.
In our next blog we will look at a case study and the consequences of making a fraudulent insurance claim.
The Legal Advice Office Team.