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Fraud - A Crime That Penalises All



Fraudsters beware - the Police and the insurance industry are working together as never before to halt what has become a multi-million dollar penalty for honest policy holders.

Insurance fraud costs the insurance industry more than $60 million a year, and adds at least fifty dollars to the annual policy costs of every New Zealand household, according to AA Insurance.

General Manager, Chris Curtin, says increased industry co-operation with Police has greatly assisted the detection and conviction of people making fraudulent claims, and will be a growing deterrent to those contemplating fraud.

Insurance fraud includes situations where policy holders exaggerate genuine claims to include items that weren't there in the first place, like expensive jewellery or clothes. Others fake burglaries in the belief that a mock theft will be indistinguishable from a real one.

Such was the case with Sue Christie*, a 23 year old office clerk from Lower Hutt - a pleasant, personable young woman about to undertake her 'OE'.

Several weeks before Sue's departure date, only one loose end remained with her travel plans. Her car, a 1987 Ford Telstar, had severe chassis rust and was unlikely to pass its next Warrant of Fitness. Faced with expensive repairs or a very low resale value, she had the bright idea of reporting it as stolen, and using the resulting insurance payment to boost her travel fund.

Two friends agreed to 'steal' the car in return for $1,000 from the insurance payout. A few nights later, she drove to a Wellington bar, parking the Telstar nearby.

Using a key she had given them earlier, Sue's friends later drove her car away and dumped it. On leaving the bar at 11pm, she pretended to be shocked that her car was missing, and went to Wellington City police station where she reported the vehicle as stolen. Everything had gone according to plan.

The next day, Sue filed an insurance claim form for her 'stolen' car. It was insured for $6,500, so she anticipated a payout of $5,900 after her $600 excess was deducted. That's where her plan started to unravel. It wasn't long before the AA Insurance investigator discovered that the claim was fraudulent, and soon Sue was paying another visit to the police station.

Although theft appears easy to fake, there are usually telltale clues, in this case arranging in advance for a lift home from a friend on the same day as the car was stolen.

Sue should currently be enjoying her travels in America. Instead, she's ended up with:

· A criminal record - after being convicted on charges of Attempting to Use a Document to Gain a Pecuniary Advantage and Making a False Statement to Police
· Payment of $500 in fines plus court costs
· Payment of $1,239.19 in reparation to AA Insurance, to recover the costs of the investigation

And that was just the beginning. On learning of pending fraud convictions, the US authorities revoked Sue's visitor's visa, and her travel plans have now been shelved indefinitely. She lost her job and her prospects of finding a new one are reduced by having a criminal record. Her Telstar is at the bottom of a cliff, so she has no transport. Finally, when Sue later seeks to ensure her next car, or any of her other possessions, she probably won't be able to find a firm willing to insure her.

In this particular case, the efficiency of the NZ Police and the co-operation between them and AA Insurance ensured that the matter was dealt with through the court expediently.

* This case study is based upon a real example of insurance fraud. Details such as names and locations have been altered.

Insurance fraud: Police opinion

Harry Quinn, detective inspector in charge of the National Bureau of Investigation Support, says that fraud is regarded as among the most serious of crimes.

"It's important that transactions between people are carried out in an open and honest fashion," says Quinn. "People have a right to expect their business transactions to be fair, not fraudulent. So the Police regard crimes of dishonesty very seriously indeed."

Reflecting this, the prison sentences which can be imposed for such crimes are very steep - up to ten years for forgery, and seven years for false pretences or aiding in the theft of a vehicle.

Insurance fraud: Industry opinion

Honest policyholders ultimately pay the cost of insurance fraud through higher premiums says AA Insurance general manager, Chris Curtin.

"Unfortunately, not everyone in the community takes insurance fraud seriously," he says. "People believe that they're stealing from a rich, faceless corporation - but the real victims are their fellow insurers."

A 1996 National Research Bureau survey of 605 New Zealand insurance policy holders found that one in five knew someone who had put in a false or inflated claim. The Insurance Council of New Zealand estimates that an average of 16 per cent of all motor vehicle claims are fraudulent.


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