The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) has emphasised the significance of honesty in insurance claims following a recent incident linked to the Auckland floods in 2023.
This cautionary tale highlights the consequences of fraudulent actions within the insurance industry.
According to the IFSO Scheme, an individual – known as Mikey (name changed for privacy reasons) – submitted a claim for his car following the Auckland floods, citing damage incurred during the Jan. 27 deluge. However, the aftermath of his claim left him uninsured and endangered his housing situation.
Mikey filed a claim for car damage, supported by a mechanic's repair estimate. However, his insurer deemed the vehicle irreparable due to flood-related safety concerns and deregistered it with Waka Kotahi NZ Transport Agency. Mikey subsequently expressed a desire to retract his claim, alleging self-repairs undertaken while waiting for the insurer's response, citing the necessity of his vehicle for work.
Upon investigation, discrepancies arose. The mechanic's assessment, predating the flood event, and the nature of the reported damage cast doubt on the claim's validity, indicating wear and tear rather than flood-related issues.
Mikey's non-cooperation prompted the insurer to reject his claim and mark the Insurance Claims Register (ICR) accordingly. Consequent policy cancellations by another insurer followed due to the ICR flagging.
Mikey's attempts to rectify the situation proved futile as his admission of deceit led to a formal flagging for fraud on the ICR. Dissatisfied, Mikey sought recourse through the IFSO Scheme.
Karen Stevens, Insurance & Financial Services Ombudsman, emphasised insurers' prerogative to address fraudulent conduct decisively, regardless of subsequent retractions or apologies.
“Mikey made a complaint to us about being put on the ICR, and said his insurer lacked empathy because he was going to be ruined financially. However, insurers have clear policies regarding fraud, and it makes no difference if someone withdraws their claim or apologises for making a false statement,” she said.
She noted a common lack of awareness among consumers regarding the ICR's implications, stressing the potential ramifications on existing and future insurance arrangements.
“People don't realise that if they are flagged on the ICR, the policies they hold with other insurers can be cancelled too, and all insurers will steer clear of giving them any new insurance from that point on,” she said. “Unfortunately for Mikey, this means that he is unlikely to be able to get insurance from any other insurer now, including for his house and contents, and he's now facing the possibility of the bank withdrawing the mortgage because he can't get insurance for his house.”
