Steer clear of “Gilding the Lily” – Avoiding Short-Term Insurance Fraud

It is unfortunate that many short-term insurance claims are either partly or entirely rejected and put the client under serious financial stress.

However, we need to appreciate that the unprecedented financial pressure that we experienced in 2020, and that we continue to experience now, has resulted in a rapid increase in insurance fraud and for those who commit it becoming increasingly creative.

As a consequence, insurance companies are on high alert as the COVID-19 financial pressures continue to press down on us.

Everyone is affected by Insurance Fraud

People may not be aware that “gilding the lily” on insurance claims is a crime and affects everyone. Think of insurance as a pot that our premiums contribute towards. Money taken from this pot by fraud affects the ability of Insurance companies to pay out legit claims of those who loyally pay their premium and genuinely suffer from loss or damage.

In instances where fraud is rife, insurance companies will more than likely increase everyone’s premiums and excesses to help rectify the financial loss to the pot.

False claims and Accidental Fraud

Insurance fraud doesn’t necessarily have to be blatant; in fact, it often tends to be very subtle and insidious. People often make false claims by either lying about a particular detail about the event, including a few items or increasing the value of lost or damaged items.

It is, therefore, imperative for you to keep proof of ownership as well as the amount that you paid from them. This will help ensure that a claim will be paid out. People may also not be aware that they are committing insurance fraud.

One way you could be unwittingly committing fraud is when an item is lost or stolen, the claim was paid out, and then the item is found or recovered. Make no mistake, keeping both the payout and the now recovered item is indeed fraud. Since the individual was paid for an item that has now been retrieved, the lost item is essentially the insurance company’s property.

In this case, you will need to inform the Insurance company once the lost item is found and either return the replacement or reimburse the payout.

Fraud Syndicates

Over-and-above individual cases of fraud, insurance companies have to be mindful of professional insurance fraud syndicates. These syndicates target individuals and Insurance companies with organised and well-coordinated tactics.

A good example of such tactics is when a crime syndicate calls luxury car owners and pretends to be the manufacturers. What usually transpires is that the well-rehearsed caller informs the owner that there is a fault in manufacturing and will send a tow truck to recall the vehicle. Owners then hand over their car, no questions asked, and never see them again.

Insurers weren’t born yesterday

The point is that Insurers have been at the game a long time and, therefore, see a lot more than you may think. They have systems in place and highly trained staff that can point out inconsistencies, showing that fraud is more than likely at play.

At the end of the day, whether it’s a multimillion-rand or smaller-scale individual crime, fraud is fraud, and insurers frequently lay a criminal claim against the individual. These can end either in substantial fines or even jail time.

The take-home message is, therefore, that honesty is the best policy. In avoiding insurance fraud, the rule of thumb is total full disclosure; share as much information and details about events, content, and the value of items or if any details change.

Needless to say, insurance operates much like everyday relationships in that they are built on trust, which is built on clear and honest communication and constant disclosure.

For assistance on your short-term insurance policy or claims, contact a financial advisor at PBA.

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Phone: 011 803 9686

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