When it comes to lodging an insurance claim, honesty is not just the best policy—it’s the legal requirement. A recent case reported by the Insurance and Financial Services Ombudsman (IFSO) serves as a timely reminder of the serious consequences of misrepresenting the facts. While the case centred on a couple’s attempt to bundle unrelated vehicle damage into a single claim, the broader issue speaks to a much larger legal concern: the ramifications of a insurance fraud.
What Constitutes Insurance Fraud?
Insurance fraud arises when a claim is found to contain false or misleading information. This may involve fabricating details, omitting relevant facts, or attempting to claim for damage or loss that occurred under different circumstances. While some people may view these misstatements as harmless attempts to “make the most” of a policy, the law takes a different view.
As IFSO Ombudsman Karen Stevens explained, “The test for a false statement is whether the statement was wrong, whether the person knew it was wrong when they made it, and whether it was relevant to the claim.”
This standard applies regardless of intent. Even if a person is confused or misinformed about the facts, insurers may still be within their rights to cancel policies or reject claims—particularly if evidence shows the insured knew the truth at the time.
Who is Affected?
Insurance fraud disputes impact more than just the individuals at the centre of a case. Honest policyholders may find themselves paying higher premiums as insurers try to recover losses from fraudulent claims. Meanwhile, those accused of misrepresentation face serious consequences: cancelled coverage, permanent flags on insurance registers, and in some cases, difficulties securing mortgages or purchasing property.
The Insurance Claims Register (ICR), managed by the Insurance Council of New Zealand, tracks flagged claims across providers. A spokesperson noted: “Trust is a basic foundation of insurance for both the insurer and the customer… a history of fraudulent behaviour can seriously undermine that trust.”
This means that even a single misstep can have a lasting impact on a person’s ability to obtain future coverage.
Navigating a Dispute
For both insurers and policyholders, the process of resolving an insurance fraud dispute can be complex. While insurers have the right to protect themselves against fraud, they must still adhere to fair process. Likewise, insured parties have the right to challenge decisions they believe to be unfair or incorrect.
In all cases, early legal advice is crucial. Misunderstandings can escalate quickly, and a lack of clarity around claim obligations may lead to unintentional errors with long-lasting effects.
Whether you’re facing an insurance claim rejection or managing fraudulent activity, Wynyard Wood offers clear legal guidance to protect your interests. Contact us today for practical, experienced support.
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Karl Robinson is Wynyard Wood’s expert insurance lawyer. Karl is experienced in bringing claims against insurers and resolving insurance disputes.