Insurance fraud 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 on a “balance of
probabilities” that fraud exists, 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 by Fraudulent Means: -
- 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.
Insurers need to remember that accusing a individual of
fraudulent activities is a serious charge. Over estimating
doesn’t constitute as fraud and where this takes place the
insured will still be entitled to his valid claim amount.
|
