Insurance fraud allegations up 22pc as inflation bites, con artists stage car crashes

Insurers reported a rise in dodgy claims, including from staged car accidents. Photo / 123RF

Incidents of insurance fraud likely rose last year, as the cost of living crisis took its toll and people tried to sneak fake claims in under the guise of Cyclone Gabrielle.

There was a 22 per cent increase in the number of insurance fraud allegations made to the country’s Insurance Fraud Bureau in 2023 compared to 2022.

The bureau’s manager, Yvonne Wynyard, said insurance fraud typically spiked during tough economic times.

“It’s easy money for fraudsters if they arrange to get a vehicle stolen, or they stage vehicle accidents after they’ve over-inflated the value of their vehicle,” she said.

Suncorp New Zealand’s fraud intelligence team leader Paul Collins noted the uptick in staged car accidents, some of which “point to the involvement of syndicates”.

He mentioned a case that came across his desk where someone claimed a car smashed into the back of their car after they braked suddenly to avoid hitting an animal on the road.

However, a specialist crash investigator concluded the story didn’t stack up, as the damage to both cars suggested they’d been driven into a stationary object, like a concrete post.

Claims made by the two drivers, to two different insurers, were both declined.

Collins said the adverse weather events of last summer also saw people inflate insurance claims or make claims for accidents that didn’t happen.

Wynyard said some people went so far as to make weather-related claims (for flooded cars for example) from parts of the country that weren’t even affected by the bad weather.

Flooding at Awatoto, Hawke's Bay, in February. Photo / Corena

She said family, friends or associates typically dobbed alleged fraudsters into the bureau.

People don’t like to see a minority rip off the system to the detriment of the majority, she said.

“So, they’re more willing to tell on people, saying ‘This is just not right’. Everyone knows premiums are affected by the more fraud there is out there.”

It is impossible to know how much fraud is committed. But the bureau, which is funded by the insurance sector, estimates it’s worth about 10 per cent of the value of insurance premiums the industry receives every year.

Accordingly, it believed about $880 million of fire and general (not life and health) insurance fraud was committed in 2023.

‘Severe’ consequences

Wynyard said the consequences of being snapped committing fraud were such that it wasn’t worth it.

A fraudster will struggle to get insurance cover again. If they manage to get some, it’ll come at a cost.

This could see them battle to buy a house, as banks require mortgage holders to have insurance.

Wynyard noted the punishment for fraud was “quite severe” and long-lasting.

She explained the bulk of insurance claims made in New Zealand are put on a register, which all insurers can access.

Collins recently dealt with a customer who made two claims for a damaged TV with two different insurers. The claim was declined, and the customer’s policy was cancelled.

Wynyard explained that if an insurer has reason to believe a claimant is a risk to their business, they’ll flag it on the register.

“It’s a powerful tool,” she said.

“If you’re stuck on that, you’re sort of indefinitely on the register as a risk to insurers. You’ll find getting insurance from another insurer is quite hard.”

The pinch is that insurers don’t always check the register when you take out insurance. So, you could spend years paying premiums, only to run into problems when you finally make a claim.

“Insurers will quite happily cover you until such time you claim, and then they’ll start investigating and looking into your claiming behaviour,” Wynyard said.

Collins noted you could have your claim declined if, for example, your insurer realises you never disclosed the fact your old insurer cancelled your policy.

“Insurance contracts are also contracts of good faith, which means that there needs to be honest disclosure of information both before the policy is taken out, and also at claim time,” Collins said.

Wynyard recognised people didn’t always realise opportunistic behaviour could be fraudulent.

For example, spilling coffee on your laptop, but saying both your laptop and phone got damaged by the accident, is fraud.

Again, Wynyard said committing this seemingly low-level offence wasn’t worth the risk of effectively being blacklisted.

Collins said fraud also included failing to provide an insurer with relevant information, or providing incorrect information to support an otherwise valid loss - ie. by saying a different person was driving a vehicle involved in an accident.

He said Suncorp used “external investigation agencies” to conduct face-to-face interviews and in-depth reviews of some claims.

“Various specialists are engaged throughout the claims review process, including licensed investigators, accident reconstruction experts, digital forensics, mechanical experts and engineers. We also use fire investigators and crash scene specialists where appropriate.”

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.