Fraud pushes up policies' premiums

Dishonest claims are pushing up the cost of personal insurance.

Thursday, October 11th 2018, 6:00AM

It has been estimated that 10 per cent of claims to general insurers are fraudulent.

While no clear data exists about fraud in the New Zealand personal insurance space, commentators said it was a problem and was making cover more expensive.

Partners Life managing director Naomi Ballantyne said she had only dealt with two outright fraudulent claims in her career.

“The kind where they were in Egypt at the time they apparently had a heart attack, confirmed by a hospital we can’t find.”

But she said other dishonest behaviour caused problems.

People might obtain insurance they should not have by including inaccurate information on their applications, or take out policies only after they discovered they would need to claim.

Another issue was people prolonging disability claims because they got used to receiving a payout and did not want to return to work.

“They have a genuine reason to go on claim but then they keep turning up to the doctor on a zimmerframe saying they can’t do this that and the next thing well beyond the expectation for their initial illness. Then when you survey them to check you see them come out of the doctor, through the zimmerframe in the back of the car and put their running shoes on and run around the block. That would be the most common.”

She said it would add to the cost of income protection policies because pricing was based the length of time people stayed on claim rather than the number of claims.

“$50,000 a year adds up to a lot if you never go back to work.”

Its cost estimates were based on past claims experience, she said.

If someone did not go back to work after the usual time, the insurer would have to review its expectations for all its other policies, which could push all prices up.

Insurance commentator David Whyte, chairman of Lifetime Group, said it was harder to defraud a personal insurance claim.

“These claims tend to be more concise in nature and require external verification - medical and/or financial - so to succeed with a fraudulent claim, the policyholder would need a collaborative doctor or accountant. Not impossible but highly unlikely - and even external evidence would be examined thoroughly.”

Tags: Income Protection