Post-catastrophe conditions create a hotbed for fraud claims according to a leading insurance investigations expert, with insurance fraud estimated to cost Australian insurers more than $2 billion per year.
QBE Claims Investigations Specialist Geoffrey Brown spoke on the topic at the recent 2015 ANZIIF Claims Convention, saying that between 5% and 10% of total claims paid are fraudulent.
“On current figures, the ICA estimates insurance fraud costs in excess of $2 billion a year,” Brown says.
“What is not known is the potential insurance fraud following a catastrophic event. Although, based on conservative estimates, even 1% would have a significant impact on the cost of claims.”
The cost of insurance claims from catastrophes since November 2014 has reached a total of $3.42 billion to date.
Brown warns that post-catastrophe claims are prone to fraud due to the influx of low-cost damage combined with fast-tracked processing.
“The propensity for insurers to pay claims quickly following a catastrophe, some with only minimal investigation, makes it easy for opportunists to slip into the process,” Brown says.
“The greatest risk of fraud is low-value, high-volume claims. This is typical of the catastrophe environment.”
“Despite the effectiveness of internal and external controls, insurers are not immune from fraud. People are the weak link in the process,” Brown adds.
The Insurance Council of Australia has suggested diligent monitoring of post-Queensland quake claims, with the council’s Campbell Fuller telling ABC News that regular damage is easily passed off after earthquakes.
“Earthquake damage often resembles the kind of wear and tear that you experience in homes, so insurers will look at claims fairly closely to determine whether it is caused by an earthquake or whether it is normal wear and tear on a property,” Fuller says.
Only minor damage has been reported following the magnitude 5.7 tremors along the Queensland coast last week.