Fraudulent claims occur when a person deliberately deceives or misleads an insurer about an injury to obtain a financial benefit.
A person may make a fraudulent claim in a variety of ways. Fraudulent behaviour encompasses everything from opportunistic ‘soft’ fraud, where otherwise genuine claims are exaggerated, and premeditated ‘hard’ fraud, where claims are significantly misrepresented or simply made up altogether.
Common examples include:
- Inflating the loss caused by an injury
- Exaggerating the severity of an injury
- Lying about how an injury occurred
A victimless crime?It’s not only conventional criminals who are making fraudulent claims. As many as 8-9% of claims in Australia may be fraudulent! This means a significant number of otherwise law-abiding Australians may be committing insurance fraud, perhaps perceiving ripping off a big insurance company as a ‘victimless crime’.
In fact, in addition to the insurers themselves, insurance fraud has millions of indirect victims. The Insurance Fraud Bureau of Australia estimates that insurance fraud costs up to $2.2 billion every year and this cost is passed on to consumers and genuine claimants. For instance, insurance fraud is estimated to raise the cost of Compulsory Third Party insurance $75 per premium in NSW!
A risky propositionPotential fraudsters should beware, as insurers are increasingly pouring resources into fraud detection. A rise in the use of surveillance makes falsifying claims an even riskier proposition.
If caught, consequences range from denial of the claim, a nasty fine or even jail time, depending on the severity and nature of the fraud.
One cautionary tale, Rita Mercuri, was handed a 16-month sentence and ordered to repay $112,187 after surveillance uncovered years of serious lies about the extent of her impairment.
When making a claimHonest claimants can protect their payouts and stay on the right side of the law by:
- Telling the truth – don’t fall prey to the temptation of telling a ‘little white lie’!
- Reporting all relevant information – and if you’re not sure, ask!
Written by Shine Lawyers. Last modified: September 6, 2018.