Insurance fraud costs Australian insurers approximately $2.2 billion each year. While this might seem like it doesn’t directly impact the lives of everyday Australians, it is one of the reasons insurance premiums are so high. More specifically, this figure equates to approximately $75 for every insurance policy that is taken out in Australia.
So, exactly what is insurance fraud and why do people commit it?
Put simply, insurance fraud is a form of financial theft whereby an individual, business, or group of people make a false or exaggerated insurance claim that results in a payout.
The most common type of insurance fraud is the exaggeration of otherwise legitimate claims, which could mean adding a few extra high price items onto the list of items that were stolen if your home was robbed. Secondary to this is the intentional, deliberated crimes committed by professional criminals, where they might stage a break in, or hide a car and claim it was stolen so they can make a claim and receive a payout, where no theft actually occurred.
Insurance fraud usually comes under three umbrellas:
Opportunistic: This refers to the exaggeration of legitimate claims
Premeditated: This form of fraud involves the deliberate fabrication of a claim, and could involve staged theft, or even arson
Fraudulent Non-Disclosure: Anyone who gives deliberately misleading information when lodging a claim, or fails to disclose a criminal conviction or any other essential information that is relevant to the insurance policy is guilty of fraudulent non-disclosure
Insurance fraud is considered a serious crime, and comes with a punishment of up to ten years in prison and hefty fines.
Despite the fact many forms of insurance fraud goes undetected (The Australian Institute of Criminology estimates the true cost of insurance fraud equates to approximately $9 billion per annum), insurance companies have strict policies in place to help detect fraud, and any assistance from the public goes a long way in supporting the fight against fraud.
If you suspect someone is committing fraud, you can report their suspicious activity to the Insurance Fraud Bureau of Australia:
The Insurance Council of Australia operates this bureau, which coordinates a range of fraud prevention strategies across the insurance industry. This authority receives allegations from multiple sources and is able to relay this information to the relevant insurer.
Suspected fraud can also be reported to your local authorities, and any reports of suspected criminal activity can be made anonymously.
Given the significant cost of fraud to the Australian community, combatting the prevalence of insurance fraud is more important than ever. The team at Sydney Insurance Brokers are more than happy to answer any fraud related questions you have, to the best of our ability.