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Fraud in the insurance
industry has
always been considered a
controversial issue, are
insurance companies
too quick to
repudiate claims where they
suspect fraudulent
activities could exist? The
onus lies on insurance
companies to prove that the fraudulent
activities exist, knowing a
claim is fraudulent is one
thing but proving this in
court on a “balance of
probabilities” is a whole
different story. For
criminal prosecution the
insurer needs to prove
fraudulent activities took
place without any reasonable
doubt.
There are 3 main
types of fraudulent
insurance claims:
1. Fabricated
Insurance Claims: -
- Involves the
fabrication of loss or
cause of loss which
allows the individual to
place a claim when one
could’ve been avoided.
- The insured suffers
no loss or a loss not
covered by the insurer
- For E.g. the owner
of a vehicle parks his
already damaged car in
the path of a storm so
branches and hail damage
the car, he then claims
in order to get the car
repaired.
- The Insurance
Ombudsman will not
tolerate claims such as
these as the fraudulent
activities are
intentional, material
and prejudicial to the
insurance company.
2. A valid loss due
to
Insurance Fraud: -
- Less serious case of
insurance fraud, here
the insured suffers a
genuine loss which the
insurance
company do
cover, the insured
doesn’t claim anything
he isn’t entitled too.
- Insured does however
provide false
information to prevent
insurance
company from
taking a technical point
or delay the claim.
- E.g. a claim for an
injury under a personal
accident insurance
policy where there is no
dispute injury is
covered, but doctor
fails to sign
accompanying report so
insured forges doctors
signature on the claim.
- The Insurance
Ombudsman would ask the
insurer to admit this
claim as the
insurance company
hasn’t been
prejudiced nor does the
action have any material
relation to claim.
3. Exaggerated
Insurance
Claims: -
- The insured claims
more from the
insurance company
than he is
entitled to.
- This is the most
common type of
fraudulent insurance
claim and the most
difficult to prove.
- An example is when
an insured’s house is
burgled after which he
claims for various
additional items which
were lost before the
burglary took place or
which he never owned in
the first place.
- A exaggerated claim
is considered fraudulent
according to case law
when:
- Insured clearly
intends to defraud
insurers.
- Where the
exaggeration of the
insurance claim is so
excessive it leads to
the inference that the
insured cannot have made the claim
honestly.
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