What happens when you lie to your travel insurer and what are the chances of actually being caught?
Insurers know a thing or two about deception, because they encounter it every day. From little fibs about the precise details of an event to completely fabricated and fraudulent claims, they’ve heard it all. Travel insurance brands in particular might be considered the experts, because according to some estimates up to 20% of travel insurance claims are dishonest or fraudulent in some way.
They’re also very good at finding out when a story doesn’t add up, and have the freedom to take certain steps with customers who lie to them. This guide explains why someone might lie on their travel insurance, what happens when you do and what the insurance company can do about it.
Consequences may include one or more of the following:
- Your claim will be rejected and/or your policy cancelled. This is likely in most cases.
- You will be blacklisted. Some insurers may blacklist you, meaning they won’t accept future business from you or will drastically raise your premiums. These blacklists may be for an individual insurance brand, or the industry at large. This means that if you get blacklisted it might shut you out of insurance policies from many different providers.
- You may be prosecuted for insurance fraud. If your lie qualifies as fraudulent and can be classified as criminal then you may face legal consequences, including prison sentences and fines.
Contents of this guide
- Why do people lie to their travel insurer?
- Lies told when taking out a travel insurance policy
- Typical fabrications when making travel insurance claims
- When does a lie become criminal insurance fraud?
- How do travel insurance brands investigate claims?
- Five real cases of travel insurance fraud, and how they were caught
- Accident. In many cases people lie to their insurer simply by accident. They make a mistake, get the details wrong or accidentally mislead their provider without even trying. This is understandable and common, and if it has happened you should set the record straight as soon as possible.
- Better policy. There are also deliberate lies told when taking out a policy, which are a breach of disclosure. If you break these for the purpose of getting a different policy than you would have been eligible for, the claim can be rejected.
- Pre-existing medical conditions. Withholding details of pre-existing medical conditions in an attempt to pay less or get a different policy will only mean that any claims related to that condition are excluded.
- Higher claim payout. In travel insurance this frequently takes the form of padding, which is inflating the value of lost or stolen items to receive more than they were actually worth.
- False claims. There have been numerous cases of people lying about lost/damaged personal belongings or causes of injury in order to receive a benefit payment. Insurance brands will take rigorous steps to verify the details of claims.
When you take out a travel insurance policy, you’re agreeing to the terms of disclosure and the terms of good faith in your policy. These basically say that it’s your responsibility to disclose anything that may affect the cost or type of cover you get, and that both you and the insurer are obligated to deal with each other honestly and with good intentions.
- Pre-existing conditions. Neglecting to mention conditions or otherwise misleading your insurer about the nature of the conditions or how effectively they’re being managed counts as a breach of disclosure. If you have to make a claim related to that condition your insurance brand will examine medical reports to assess whether the claim should be paid.
- Purpose of your travel. Destination, reasons for travel and activities participated in (if excluded) will also need to be disclosed.
Larger travel insurance brands often receive thousands of claims every week. Unsurprisingly, a lot of them are false and insurers are very good at identifying them.
- Lying about the circumstances of an incident that led to a loss
- Claiming damages that never occurred
- Fabricating evidence to support your claim
- Overstating the value of items you are claiming
- Claiming for deliberate damages or self-inflicted losses
The insurance industry is estimated to lose about $2 billion to fraud each year, with the costs being passed on to honest customers by raising premiums across the board. You may be surprised to know that the courts take this extremely seriously, and offenders risk extensive jail sentences of up to ten years or more. It might feel like a way of trying your luck at a bit of extra cash, but that’s not how the criminal justice system sees it.
There’s a fine line between telling a little white lie and committing criminal insurance fraud, and that line starts at the notion of deliberately misleading your insurer for personal gain. This includes overstating the value of lost, damaged or stolen items, fabricating incidents or claiming for planned or deliberate losses.
- If you are making a deceptive travel insurance claim purely for profit, with the intention of coming out ahead of where you started, you are committing insurance fraud. The insurers will not only reject your claim but may seek criminal penalties and will likely blacklist you.
- If you have accidentally misstated events, mistakenly misled your insurer, or if your falsehoods were not perpetrated for deliberate financial gain, then it typically does not qualify as insurance fraud. Insurers will most likely reject your claim and may choose to blacklist you, but usually cannot seek criminal penalties.
Insurers have many ways to spot lies, usually dependent on what type of claim is being assessed.
- Stolen items, damaged property, missing possessions. If you read the terms of your travel insurance policy, it will often become apparent that you need to include a police report as part of the claims procedure. If you don’t include this then your claim will usually be denied as a matter of course.
- Travel cancellations and delays. Travel insurance brands will only pay out for events that were beyond your control.
- Medical expenses. Travel insurance policies may pay for necessary medical treatments as recommended by medical professionals and emergency treatments in hospital. In all cases this will leave a paper trail with medical professionals and hospitals. Your travel insurance brand will take the necessary steps to review the treatment that was received.
Travel insurance brands are used to dealing with fraudulent claims. Here are five real cases of travel insurance fraud encountered, and solved, by Southern Cross Travel Insurance (SCTI).
- The time-travelling watch. A customer, claiming a watch had gone missing on his travels, provided some photos of the item. Unfortunately for him, the metadata uncovered from one of the photos showed that it was taken after the watch had supposedly gone missing.
- The self-repairing car. One traveller claimed that someone broke into the boot of her car to steal a laptop, sunglasses, clothing, money and other items, and that she had the car repaired before she was able to document the damage. When SCTI’s investigators contacted the named repairers, however, there was no record of that car being worked on.
- The camera’s twin. A customer made a claim for a lost camera, but when SCTI started processing it they realised there was something very familiar about that camera. In fact, they had already paid a claim for that exact same camera several years ago.
- The blatant forgery. A claim was made for two iPads, camera gear, clothing and luggage worth about $13,000 in total stolen by a taxi driver. This serious claim came with a police report and letter from the hotel manager, both of which, it was quickly discovered, turned out to be completely fabricated.
Travel insurance claims typically need to be supported with evidence like police reports or itemised receipts. Without these, claims can be denied, and with them falsehoods can be easily spotted.
This means lying to your travel insurance provider is simply not worth it, and should be avoided. Take advantage of the benefits insurance offers, but don’t try to turn it into a money-making scheme. The risks are too high, and the rewards are too low.
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