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Fraudulent insurance claim after Auckland floods backfires – IFSO Scheme

The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) is warning consumers of the importance of honesty when making insurance claims. This comes after a recent case where an individual filed a fraudulent insurance claim for his car after the Auckland floods in 2023. The repercussions left him not only uninsured but also facing the imminent risk of losing his house.

Mikey- made a claim after the flooding event in Auckland on 27 January 2023 for damage to his car and provided a quote from a mechanic for the cost of repairs. However, rather than repairing his car, Mikey’s insurer wrote it off and notified Waka Kotahi NZ Transport Agency to deregister it, a standard practice in the insurance industry due to the safety risk posed by flooded vehicles.

Mikey then said he wanted to withdraw his claim, saying he had already fixed the car himself while waiting for the insurer to get back to him. He also said he needed his car to get to work.

His insurer investigated. They found that the mechanic’s assessment was from 13 January 2023, which was before the flooding event happened. They also reviewed the mechanic’s assessment and found that the damage was not consistent with damage caused by flooding; rather, it was more likely caused by wear and tear.

At this point Mikey refused to cooperate with the investigation, so the insurer declined his claim and put a flag on the Insurance Claims Register (ICR), noting the claim outcome. Mikey’s house and contents policies he held with another insurer were then cancelled due to the flag on the ICR.

Mikey wanted the flag to be removed from the ICR, so admitted to his insurer that he had lied about his car being damaged in the floods. However, his insurer just updated the flag on the ICR, changing the reason the claim was declined to fraud. Mikey then made a complaint to the IFSO Scheme.

Karen Stevens, Insurance & Financial Services Ombudsman, says insurers have the right to cancel a policy and put a flag on the ICR if they have deliberately misled their insurer.

“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 says.

Stevens says that many consumers aren’t aware of the ICR, or of the fact that insurers share information with each other.

“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 says.

“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,” says Stevens.

Mikey’s case serves as an important lesson for consumers, Stevens says. “It’s vital to always tell the truth to your insurer, as the consequences are just not worth it.”

The IFSO Scheme resolves complaints about insurance and financial services, and its service is free for consumers. People can make a complaint to the IFSO Scheme at www.ifso.nz or by calling 0800 888 202.

 

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