For a fairly large chunk of insured consumers, it would the answer to that question is yes.
According to the South African Insurance Crime Bureau, 30% of insurance claims are estimated to be fraudulent.
And the other two thirds pay in the form of increased premiums and by having their legitimate claims very closely scrutinised and investigated.
Here’s the thing - some people view inflating or fudging their insurance claims as socially acceptable: adding a few items to a claim, things which weren’t stolen during that break-in; or not letting on that it was actually their younger, newly licensed brother who crashed their car into the gatepost, not them, the policyholder?
Many justify their morally challenged behaviour by telling themselves things like: “Well, I’ve been paying high premiums for years without a claim.”
But practising that kind of selective morality is a slippery slope, and there are both contractual and criminal repercussions.
The thing is that any form of dishonesty, no matter how small, will earn you the tag “moral risk” within the insurance industry. And given that the insurers share information, that’s a major problem.
Moral risk
Ombudsman for Short-Term Insurance, Dennis Jooste, says moral risk is a buzz term for insurers considering whether or not they can trust a consumer.
Of course, they can only make an informed decision on that if they know about their moral lapses. But chances are, they will get to know about it, sooner or later, Jooste says.
"Truth has a horrible way of revealing itself in the most unexpected ways, and, of course, an absolute no-no is to provide the insurer with dishonest information at claim time. That’s fraud; a very serious transgression reflects on the moral integrity of a person.”
I raised this issue of “moral risk” with the Ombudsman in the context of a slightly different scenario involving insurance fraud.
Someone I know approached me for advice recently about an moral dilemma he faced regarding an accident he had in a traffic jam on a Durban freeway. A woman had hit his car from behind - her fault, not his - and he wanted to avoid making a claim on his own insurance policy, and rather make a third party claim on the other person’s policy.
Problem is, that woman was driving a company vehicle, with other employees as passengers, and the owner of the company told my acquaintance that she wasn't authorised to drive that vehicle in terms of the policy.
So he asked my acquaintance in order to make a third party claim on his - the company owner’s - policy he’d have to state in his police report that it was him, not the woman, who’d been driving at the time of the accident.
He was tempted to do it because if he claimed on his own policy, he’d have to pay an excess; he’d lose his no-claim bonus, and he was worried his premium would go up as a result.
I hope I talked him out of it.
The ombudsman weighs in
Jooste confirmed that it was a very bad idea.
“The motive is a selfish one; he wants to benefit himself financially by not suffering the loss of the no-claim bonus. He’s asked to tell the other party’s insurer a lie, which involves participating knowingly in assisting the third party in filing a fraudulent claim. Not only is it totally dishonest but I believe it constitutes a criminal offence.”
And deliberately lying to the police is defeating the ends of justice, Jooste said. There’s just absolutely no basis whatsoever for the innocent driver to participate in this type of behaviour.”
All it would take was for a witness to contradict my acquantaince’s version of who was at the wheel of the other car, and he’d be exposed. The other insurer would very likely inform his, and he’d be branded a moral risk. If his policy was cancelled by his insurer as a result, he’d have to declare that when applying for new insurance cover, and he would probably be turned down.
So I advised him to claim on his own policy, and tell the total truth about what happened.
It’s the best route, even without the complication of the driver’s status, because third party claims can drag on for months before being settled, and as a third party you have no bargaining power with an insurance company you’re not contracted to. You are not their client and they owe you nothing.
Much better to let your insurer deal with the claim, and then attempt to claim back from the insurer of the “guilty” party. If they succeed, you’ll have your excess payment refunded.
Honesty is always the best policy, especially when it comes to insurance, both when you’re applying for cover, and when you’re making a claim.
* The Ombud’s office considers complaints about insurance companies fairly, impartially and free of charge to consumers. Average time to resolve complaints is about 80 days, and they find in the consumer’s favour in 31% of cases. Contact: www.osti.co.za.
*To report insurance fraud, call the Insurance Fraud Line on 0860 00 2526, or e-mail insurance@fraudline.co.za.
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