How Insurance Fraud Can Impact Your Business
Insurance fraud is estimated to cost up to $2.2 billion every year. Many consumers ignore these figures, assuming that insurance fraud only affects the big insurance companies. The truth, however is that insurance fraud directly impacts the premiums for honest policyholders. In order to remain profitable, insurers have to pass the costs that they lose through to their clients, who see higher premiums, higher excesses and policies with more exclusions.
Some types of fraud are deliberate while others are committed without the person realising. Types of insurance fraud typically fall into the following categories:
Non-Disclosure: This fraudulent behaviour can be done deliberately or not. Non-disclosure basically means that you haven’t revealed certain pieces of information to an insurer that would potentially affect their decision to cover you or to pay out a claim. For example, if you are applying for business property insurance, you may neglect to mention that your building has flammable cladding in its structure
Deliberate Fraud: This is a premeditated and calculated behaviour that a person employs in a deliberate effort to mislead an insurance company and receive an insurance payment. For example, if someone sets fire to property or fakes a theft in order to receive an insurance payout
Exaggeration:This occurs when someone makes a claim and exaggerates the amount of damage or cost of the loss to receive a larger claim payout.
How to Avoid Committing Insurance Fraud
Obvious deliberately committing insurance fraud can be stopped easily. There are also steps that you can take to avoid accidentally committing insurance fraud:
Be Honest: Never exaggerate the value of something or the extent of the damage caused. Also, make sure you tell your broker or insurer anything that you think may be relevant in the event that you have to claim.
Read Your PDS: Your Product Disclosure Statement details the things that are included and excluded in your policy, as well as circumstances that render your insurance void. If you know clearly what these things are, you can make sure you avoid them. Your insurance broker will be able to go through this document with you and highlight the important points to note.
Read the Duty of Disclosure: Your broker will provide you with a Duty of Disclosure document, which will detail the key information that should always be disclosed to your insurer. They will also help guide you through the entire process while you are obtaining cover or in the event that you need to update business details.
The insurance industry as a whole is dedicating significant resources and investing in ways to combat insurance fraud. New technologies and software programs have been developed to identify fraud, backed up with specialist claims teams who investigate these matters
There is also an organisation called the Insurance Fraud Bureau of Australia (IFBA) that works with insurance companies to notify them of information related to possible fraud. In addition, the IFBA helps develop strategies to reduce fraud in the industry, which helps protect honest consumers from bearing the brunt of the costs.
By sourcing your insurance through a broker, you are less likely to inadvertently commit insurance fraud. In order to avoid fraud through non-disclosure, it’s important to keep your insurance advisor up to date with any change in your business’ circumstances.
For more information on insurance fraud and how to avoid it, get in touch with your Prelis Insurance Solutions today.