Getting around the industry's vetting is about to get harder because the Insurance Council has upgraded its register software and is expecting to catch many more cheats.
Dave Ashton, the council's claims register manager, says seven million existing records are being entered into the system, which will go live next month.
The same software is in use by organisations such as the FBI, CIA and Interpol, says Ashton. It's designed to collate, analyse and visualise massive amounts of data from disparate sources to identify patterns that humans might overlook.
With the old system, insurers could search at claim time to see if there was any relevant information relating to a claimant. The new system will automatically flag overnight suspicious claims or trends.
For example, says Ashton, it might identify one person double dipping through two different insurance companies. This isn't uncommon with post-holiday claims in which the same item is claimed for on the travel insurance policy and a house contents policy. It will also identify a pattern of claiming from an individual or business across multiple insurers.
Insurance liars, cheats and fraudsters get caught in several ways. Insurance companies use former police officers as investigators to identify fraud and dishonesty. The council also has a tip-off line and gets several calls and emails a week.
Insurers all have post-claim audit systems, which are being run over Christchurch claims currently, says council operations manager Terry Jordan. Some claims paid at the time of the earthquakes, when there wasn't sufficient manpower to investigate them, are likely to be picked up through this.
One Christchurch fraud that did come to light at the time was of a woman who claimed for the loss of her entire contents - worth $141,000. She subsequently moved to Napier. When an investigator looked at the inventory for the shipping of her belongings from Christchurch to Napier it included virtually all the items that she claimed had been destroyed by the earthquake.
An example of a fraudulent claim identified by the tip-off line was of a man who claimed for an expensive watch. Some months later a tip-off was received that the man was selling the watch on Trade Me, suggesting it had never been stolen.
Some of the fraudsters in the council's hall of shame were just downright stupid. One burglary victim claimed for a 55-inch Sony TV, even though Sony had never manufactured one that size. The woman admitted she had claimed for the fictitious TV because she wanted one with HDMI capability. It turned out that a 40-in TV that was in fact taken in the burglary was a stolen item that she had bought. The case was handed over to the police.
In another case it was alleged two paintings worth $40,000 had been deliberately slashed rather than, as the policy-holder claimed, damaged falling off the wall in the earthquake.
Insurance companies only have to prove fraud to the level of a civil court, not a criminal one, says Virginia Douglas, the Insurance and Savings Ombudsman manager of legal and financial services. What's more, insurers can often decline on other terms and conditions in their policies such as non-disclosure.
In some cases, says Jordan, someone caught cheating will find themselves unable to get any type of insurance cover - including a policy to cover their home - which can be devastating.
The misdemeanour leading to this situation doesn't need to be insurance-related. Any fraud or criminal activity will be held against you if you want to get insurance. The Ombudsman's office gets calls from parents who have provided a home when their children leave jail, then have their insurance cancelled.
Jordan recently dealt with a woman whose bank was threatening to sell her property because she couldn't get insurance as a result of her conviction for fraud as an employee. She couldn't understand that she was no longer a good risk to the insurance company.
Policy-holders may be tempted when they take out or renew a policy not to declare their fraud, other criminal convictions or the fact they've had insurance cancelled by their insurer. If they're found out, however, otherwise valid claims can be declined on the grounds of non-disclosure.
Many people think it's okay to add a few extra items on to a claim to cover the excess and don't realise that this is fraud, or that it could affect their ability to get insurance in the future.
"Once you have signalled to the community you are a moral risk, insurers don't want to have anything to do with you," says Jordan.
It's inevitable there will be miscarriages of justice. There will also be those who are genuinely confused and say different things to the call centre from what they write on their claim form.
"This is an education issue," says Andrew Hooker, managing director of Shine Lawyers NZ. "Why should you be banned from getting insurance for the rest of your life because you were confused?
"I see many cases where people are accused of fraud but don't have the ability, finances or time to fight back, so the insurers just label them as fraudsters. They think 'it's only a $100 claim, what can I do?', says Hooker.
"In insurance, if the insurer believes you have made a false statement in support of a claim, they label that as fraud, even if the claim is otherwise genuine," he says.
"I see many cases where insurers call something a lie when it is a misunderstanding or error, but if unchallenged it is categorised as fraud or a false statements."
Insurers must write a justification to the council to flag someone in the system, says Ashton. Individuals can use the Privacy Act to access the information on them, using a form found online (tinyurl.com/insurancecouncilform).
If you are unhappy with the information held about you, you can complain to the Insurance and Savings Ombudsman, Financial Services Complaints (FSCL) or the Privacy Commissioner. If the Ombudsman or FSCL uphold your complaint, the flag on the database should be removed. If, however, the insurer was justified in turning down a claim on fraud or other grounds, the flag will remain.
Insurance companies do have other ways of dealing with customers they're not quite comfortable with. Often they will impose a large excess, such as $1,000 on glasses claims, or simply exclude items from the person's policy.
Insurance fraud is a cost on everyone. The council likes to describe it as "Insurance fraud, the crime you pay for". In other words, the more fraudulent claims there are, the higher everyone's premiums.