4 Things You Might Not Know Are Insurance Fraud

The word ‘fraud’ probably brings to mind serious white-collar crime or online scam rings. You probably don’t think about a small business owner telling a white lie about how their laptop broke or adding extra items to a claim form.

But these actions, and plenty of others, are considered insurance fraud. In many cases, the business owner might not realise they’re doing anything wrong.

“Most customers try to do the right thing,” says Holly Williams, Head of Customer Success at BizCover. “However, some may unknowingly be committing insurance fraud. Some actions—like telling a tiny fib about how an item was damaged—may not seem like a big deal, but they can land you in trouble if your insurer finds out.”

Here are four things you might not realise are insurance fraud that could land you in hot water with your insurance company:

1. A small lie about your insurance history

What’s the harm in telling a fib to a new insurer? This might be only disclosing one claim when you’ve actually had three, or ‘forgetting’ to disclose that your previous cover was cancelled by the insurer.

2. Stretching the truth about what you’re insuring

Say you work from a home office, and get insurance to protect your business laptop, printer and mobile phone. What’s the harm in claiming that your kid’s tablet and the family big screen are also business equipment? After all, they are technically kept in your place of business.

3. Exaggerating the size of your loss

You’re making a claim and decide to add a few extra items to the claims list. They weren’t damaged or stolen, but they are old. Why not use this as an opportunity to get an upgrade?

4. Dummying up invoices to prove ownership

You’re making a legit claim, but the insurer needs proof of ownership before they’ll pay. The problem is, you can’t find the receipt. No worries—you’ll just use your design skills to whip up a quick invoice to keep things moving.

What’s the big deal?

“Insurers take insurance fraud very seriously,” says Holly. “Depending on the actions taken and their severity, your insurer could react in a variety of ways—anything from cancelling your policy to reporting the fraud to police for prosecution.”

Common ways that insurers manage fraud include:

• Reducing a claim payout, leaving you partially out of pocket when covering your loss
• Rejecting a claim, leaving you completely out of pocket
• Cancelling your policy from the inception (start) date, leaving you uncovered
• Reporting the fraud to the police for investigation and prosecution
• Bringing a lawsuit against you and/or your business

Insurance fraud also affects everyone who buys business insurance. Preventing and detecting fraud takes time and money, and fraudulent claims can increase the overall cost of claims. This leads to higher premiums and longer claim processing times for everyone.

What can small business owners do?

The consequences of insurance fraud are serious and can hurt your business and the broader small business community. Fortunately, it’s easy for small business owners to help fight fraud.

Here are some fraud-fighting tips to keep in mind:

• Always disclose your full claims history to new insurers
• Always let a new insurer know if your previous policy was cancelled by the insurer
• Insure business items and personal items separately (your Home & Contents policy is for your personal belongings!)
• Only claim items that were truly lost, stolen or damaged during an insured event when you make a claim
• Keep a record of items to help establish proof of ownership
• Ask your insurer if they accept alternative ways to prove ownership (such as original packaging, valuations, or photos) if you can’t find the original receipt or invoice

“It may sound cliche, but honesty really is the best policy when it comes to business insurance,” says Holly. “Doing the right thing helps make the insurance experience better for everyone.”

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