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 started paying his premiums diligently. After about 6 months Randal submitted a vehicle theft claim, saying that he’d 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, amongst other things, that:
- Bob 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
Somehow people don’t regard insurance fraud as a serious crime. Even normally law-abiding citizens, quite regularly 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 register a claim for the “loss” suffered?
- Expect an insurance company to pay out the full value of a loss despite the fact that they deliberately insured their possessions for a lower value than their true worth.
The example above illustrates why insurance companies so carefully scrutinize each claim they receive. The reality is that, if fraudulent claims were accepted, the increased costs would negatively impact the premiums of honest clients, effectively allowing the cost of dishonesty to become a form of tax on the honest citizenry
However, all of this results in the erroneous perception that insurance companies are unreasonably stringent when it comes to paying claims – or that they conspire not to pay out claims at all, despite taking a monthly premium from the insured individual.
This is far from the truth. As long as the claim is as a result of an insured event, is truthful and legitimate, the client has complied with the policy terms and conditions and the claim meets specific due diligence criteria, claims will be paid out more often than not.
Honesty is the best policy
The majority of South Africans are upstanding and honest claimants. But for those who may be contemplating a fraudulent claim, beware – you will get caught and this could have severe implications, since the law views insurance fraud in a very serious light. A fraudulent claim could result in a policy being cancelled and other insurance companies will not likely cover a known fraudster in future.
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 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
*The name has been changed but the story is based on a true incident
*Willem Smith is the CEO of Old Mutual iWYZE valuables insurance