Insurance fraud is not worth the risk

The majority of South Africans are honest claimants. But for those who may be contemplating a fraudulent claim, beware - you will get caught and this could have severe implications

WHEN Bob Randal* applied for vehicle insurance from a short-term insurer he was asked to have his vehicle inspected at an authorised inspection company as part of the application process.

He duly supplied the insurance company with the certificate and diligently started paying his premiums.

After about six months, Randal submitted a vehicle theft claim, saying that he had parked his car in a certain place and when he returned, it had vanished.

As is standard practice, the insurer investigated the claim and discovered, among other things, that:

- Randal claimed to have purchased the vehicle for cash so there was no record of the sale and no lease agreement;

- He said he travelled to another city to collect the vehicle, but he could not remember exactly where he met the seller and he no longer had the seller's name or phone number;

- When asked for the vehicle's ignition key, he claimed to have "misplaced" it.

When confronted with these and various other suspicious-sounding findings, Randal finally admitted that the vehicle never existed and that he had falsified the documentation he originally sent to the insurer.

A question of ethics

Insurance fraud is defined as any act committed with the intent to deceive, including the deliberate falsification of information by a claimant in order to obtain a financial advantage or gain.

Unfortunately, many don't regard insurance fraud as a serious crime. Even ordinary law-abiding citizens can give in to the temptation to:

- claim from insurance for items they never owned;

- inflate insurance claims;

- fabricate or even stage an incident and then claim for the "loss" suffered; or

- expect an insurance company to pay out the full value of a loss, despite the fact that they insured their possessions at a lower value than the true worth.

In a study by the Insurance Council in Australia, it was found that 25% of people interviewed claimed to know somebody who has committed insurance fraud, 20% endorsed the exaggeration of an insurance claim and 38% believed that insurers can afford the cost and that there are no losers.

Fraudulent insurance claims in South Africa cost the insurance industry about R3-billion a year.

The example above is one illustration of why insurance companies scrutinise each claim they receive.

The reality is that, if fraudulent claims were accepted, the increased costs would negatively affect the premiums of honest clients.

The majority of South Africans are honest claimants. But for those who may be contemplating a fraudulent claim, beware - you will get caught and this could have severe implications.

A fraudulent claim could result in a policy being cancelled, and other insurance companies will not cover a known fraudster.

The answer?

Provide accurate and honest information to your insurer. Understand and adhere to your policy terms and conditions. Make legitimate, truthful and substantiated claims and there should be no reason why you will not be compensated. More importantly, stay on the right side of the law. Anything else is simply not worth the risk.

Consequences of being found guilty of insurance fraud:

- Repudiation of insurance claim with current insurer;

- Not being able to get insurance cover from other insurance companies should fraud be disclosed after an investigation is concluded;

- Being handed over to SAPS for prosecution.

For more information or a quote from iWYZE, SMS SOWETAN to 33920. SMS costs R1.50

*The name has been changed but the story is based on a true incident.

Smith is the chief executive of Old Mutual's iWYZE valuables insurance