'Little lies' have big consequences says insurer

Friday, 24 July 2020

When it comes to buying insurance, set aside some time, and accept that adults read the contracts they agree to.

One in six Kiwis lie about their car insurance, according to a survey conducted by car insurance comparison site Finder, but it pays think twice before you inflate your insurance claim, says Insurance and Financial Services (IFSO) Ombudsman, Karen Stevens.

“A ‘little lie’ can have big consequences.”

Vehicle insurance policies – and most other types of insurance – will almost immediately be voided if the company finds out about any white lies that may jeopardise the validity of the claim or even get you in trouble with the law.

If this car was driven by a learner driver without an L plate or with passengers, their hopes of a claim would be in a similar state.

For example, a man claimed his van had accidentally caught fire, because a petrol can had been knocked over during a “sort of a romantic meeting” on a mattress in the back. He said he’d later attempted to light a cigarette outside the van and “there was a boom”.

Had those tyres be bald, the insurance company could reject the claim, regardless of the validity of the car’s warrant of fitness.

* Story about back-of-van 'romantic meeting' sparks insurer suspicion

* Consumers still expect too much from insurance

* Ombudsman warns fraud a serious problem for insurers

There are a few different kinds of vehicle insurance. It pays to know what yours is so you know any exclusions, limitations and how much you might be entitled to after a claim.

The insurer had strong evidence to prove the claim was fraudulent: petrol was everywhere in the van; the fire service had been called 38 minutes after the fire began; and the man had been trying hard to sell the van.

Insurance cancellations can come from breaching licence conditions, like a learner driving with passengers and crashing, or driving a car with bald tyres, even if it has a current warrant of fitness.

False statements can’t be retracted either.

Kevin McHugh, Finder’s publisher in New Zealand, said: “Insurers do not take kindly to dishonesty. What may seem like a little white lie can end up costing you big if you need to make a claim.”

There are varying degrees of dishonesty, and the law recognises a difference between a fraudulent claim and a false or dishonest statement in support of what would otherwise be a valid claim.

“But the consequences for both fraud and dishonesty are more serious than most people think. When we investigate complaints involving dishonesty, false statement or fraud, we look at the policy, and whether the insurer has been able to provide evidence to the legal standard,” Stevens added.

The IFSO Scheme suggests checking your policy for exclusions and limitations that might result in a claim being rejected. In most cases, if a claim is accepted, an excess must be paid regardless of who caused the damage.

Make sure you know what sort of policy you’re getting too. Aside from the standard trio of third party, fire and theft or comprehensive insurance, vehicle valuations fall under ‘agreed’ or ‘market value’.

When you apply for insurance, you will be asked to indicate what you think your vehicle is worth (the sum insured). This value is used to work out how much the insurer will charge you for your premiums.

Agreed value policies provide more certainty about the amount you will be paid out in a total loss situation. The market value is the cost of buying a car in similar condition to your car at the time of the accident or loss (an insurer will get one or more PAVs – pre-accident valuations – to work out what the car would have sold for immediately prior to the accident or loss). A specialist vehicle valuer will work out the market value, taking into consideration the car’s pre-accident condition and any modifications.

Typically, market value policies have cheaper premiums than agreed value policies.

The biggest tip from the IFSO Scheme is to simply tell the truth.

“The long-term consequences of insurance fraud are hard hitting. Declined claims are the tip of the iceberg,” says Stevens. “If your insurance policies are cancelled, and your name is listed on the Insurance Claims Register (ICR), this makes it difficult to get future insurance, which can be devastating, for example, if you’re trying to buy a house.”