A startling but perhaps not unsurprising headline in both the insurance and mortgage press caught my attention the other day. According to some research commissioned by one of the price comparison websites, one in five UK householders admitted to having lied or withheld information when applying for home insurance.
More than half justify their white lie saying that insurance premiums are simply too expensive. Given the ongoing squeeze on household incomes, it’s not surprising that many hold this view. Ordinary families across the country have to stretch the money in their pocket further to meet their outgoings as prices go up while wages stay the same, and so may well consider telling a white lie or withholding information to save a few pounds.
However, the research uncovered an underlying problem that the insurance industry has been battling to address. Of those who admitted lying, 27% don’t believe that withholding information is a form of fraud. Almost a third says that everyone tells untruths when getting a home insurance quote, so it’s ‘no big deal’.
The University of Portsmouth compiled a profile of the person most likely to lie to their insurance company using data from insurance fraud claims investigators last year. They’re not serious professional criminals, rather they’re aged between 31 and 50 and have never before made a false claim and are likely to think that rather than a crime, they’re being only a ‘little dishonest’. The university’s fraud expert revealed that research on dishonesty suggests that many people are prepared to be a little dishonest in life. Withholding certain information or telling a white lie when on an insurance application or exaggerating a household insurance claim may well be perceived as a little dishonesty, which mostly honest people do allow themselves to engage in.
The simple truth is that insurance fraud has become acceptable amongst the general public. It’s viewed as victimless, no-one gets hurt and the insurance companies can afford it – can’t they?
Regardless of what the general public may think, withholding information or telling a white lie to get a better premium or exaggerating a household insurance claim to get a bigger payout is a crime under the Fraud Act.
If found out, the slightly dishonest policyholder could find themselves with a criminal record, out of pocket and barred from buying insurance or credit products. If someone can’t buy insurance, then they can’t get a mortgage as they have to have buildings insurance to protect the property. If they can’t buy insurance, they can’t own a car as it is compulsory to insure a vehicle. If they’re reliant on their vehicle for their job then would their job be at risk and therefore their income?
And insurance fraud isn’t victimless. The cost of fighting fraud affects every policyholder from the squeaky clean to the slightly dishonest to the downright fraudulent. It’s a well known fact that fraudulent activity adds an extra £40 or so on every insurance policy every year. The average household more than likely has at least four policies meaning that the homeowner is losing £200 a year to pay for the dishonest activity of others.
When helping your clients arrange their household insurance, mentioning these few facts may help ensure that they don’t honestly forget to disclose all relevant information but also make them aware that fighting fraud is up to all of us, not just the insurer’s investigating teams.