NZILA President’s message – Myles Noble
Fraud creates pandemic claims spike
When tough economic times hit, there are always people who seek to take unfair advantage by committing fraud.
There’s no doubt the Covid-19 pandemic is resulting in increased claims in some sectors, with a spike already identified in areas like travel, life, health, and event cancellation. Although that has been offset by decreases in motor vehicle claims (with fewer vehicles on the roads) and fewer workplace incidents.
It is also widely predicted there will be an increase in employment dispute and D&O claims, with some insurers already applying restrictions on writing these covers.
But past history has shown that, during economic crises, fraudulent claims also increase.
Dennis Toomey, Global Director, Counter Fraud Analytics and Insurance Solutions, at BAE Systems Applied Intelligence, has quoted Association of British Insurers statistics that show the 2008 recession saw a total of 107,200 false insurance claims worth £730 million. That was a 17% increase on the previous year, when fraudulent claims totalled £560 million.
He expects similar increases, sparked by the Covid-19 pandemic, across the globe.
It’s highly likely New Zealand will see increases in fraudulent claims as the economy struggles to recover from the ongoing ramifications of the pandemic.
The Insurance Fraud Bureau NZ (IFBNZ) in June released statistics from a survey that identified that:
• Four in 10 respondents thought the consequences were light if you were caught committing insurance fraud
• Six in 10 thought the cost was up to NZ$70 million a year, instead of the industry estimate of NZ$680 million
• Eight in 10 thought, incorrectly, the worst thing that could happen was your claim being denied
• 40% didn’t think they could get a criminal record if convicted of insurance fraud.
Those statistics alone show there is a big job for our industry to work with the IFBNZ, set up by the Insurance Council of New Zealand in September 2019, to help educate people about the ramifications of committing insurance fraud.
People may think life’s tough living through a global pandemic, but dishonestly claiming against an insurance policy will make it a lot harder.
While some erroneously consider insurance fraud a “victimless crime” and that they’re “just getting back what they’ve paid for all these years”, those of us at the industry coal face know that’s not true.
Everyone with a policy has to pay for insurance fraud. A portion of every premium is to cover claims made through deception or dishonesty.
BAE’s Dennis Toomey has warned that “alongside the sad and vast expense of legitimate claims, it is an unfortunate fact that, in times of economic hardship, people have a history of taking any opportunity to exploit financial institutions for ill-gotten gain”.
He predicts insurance fraud will be high on disreputable claimants’ target list in the Covid-19 landscape.
The Covid-19 environment is also likely to spawn an increase in complaints about insurers.
Most NZ policies will not cover business interruption and other ramifications of the pandemic. Careful reading of policy wordings will be paramount for insureds and their brokers to determine what coverages, if any, are available.
Insurance Business NZ has quoted Financial Services Complaints Ltd (FSCL) CEO Susan Taylor as saying the organisation’s year end saw a 40% increase in complaints across the board.
She said the majority were Covid-19-related complaints against travel insurers, but other areas of financial services also saw significant numbers of upset customers.
FSCL staff had to navigate the complaints increase during lockdown, with staff working from home and financially distressed customers wanting urgent answers.
Ms Taylor has predicted the complaints spike will continue.
It’s tough times ahead for our industry.
PNZILA had planned its first hybrid conference, with attendees choosing to attend in person or online. However, with changes to NZ’s regulations because of the Covid-19 pandemic, the event has now been converted to an online conference only.
The Wednesday 16 September half-day event will be packed with industry learnings and updates. Sessions will examine topical issues and what we might expect for the future of our industry.
To view the program, click here.
Date: Wednesday 16 September 2020
Location: Online only – register here