Has your iPhone 5 become an X in a claim? Here's why you will regret it

Many people think nothing of “upgrading” their phone or other electronic equipment when putting in an insurance claim for losses suffered in a burglary, but that “little” lie can have very big, bad consequences.

Even a small fib - or, to use insurance-speak, “misrepresentation” - when you’re making a claim on your insurance policy can cost you the entire claim and leave you labelled a “moral risk”, says Short-Term Insurance Ombud Deanne Wood.

As a red-flagged "moral risk”, you attract higher premiums, and risk being off-loaded by your insurer.

Wood said this week that as consumers are being squeezed financially from all sides, insurers are bracing themselves for a spike in “inflated” claims.

“The assessors go to great lengths to prove misrepresentation,” she warned.

“Many people think nothing of upgrading their stolen goods [on the claim form] - often an iPhone 5 becomes an X, or the 32-inch TV will be claimed for as a 54-inch.”

The claimant thinks of it as an insignificant massaging of the truth, she said, but the impact is potentially massive: if the insurance assessor is able to prove the “misrepresentation”, the entire claim will most likely be rejected, and the person will be labelled a “moral risk” from then on.

“The insurer’s stance is: ‘If they’re being dishonest about that, what else have they lied about?’,” Wood said.

And ultimately, all insurance clients are punished for such “minor” dishonesties, Wood said, because it leads to assessors adopting a “no leniency” stance with an increasing number of claims.

The South African Insurance Association estimates that almost a third of claims are laced with some element of dishonesty.

According to the Insurance Crime Bureau, those who commit insurance fraud fall into two distinct camps - those who take out policies with the intention of stealing, and those with existing policies who fake a theft or inflate the value or extent of genuine claims.

“Very often consumers claim their sunglasses were in their car when it was stolen,” Wood said. “Assessors are very wary of that one.”

“I have come across some unbelievable things that happened at claims stage,” the Ombud said. “The assessor will ask for proof of payment for the sunglasses; the client says he lost the slip, and is then asked  when he bought them and bank statements are sourced to check that story. And when there’s no such purchase to be found, the client says: 'I remember now; I used my friend’s credit card to buy them…'”

Wood advised consumers to take photos of everything in their home which they would want to claim for if these items were damaged or stolen.

“Some insurers encourage their clients to regularly send them digital photos of the insured items, which is a very good idea,” Wood said.

With motor accident claims, many motorists try to cover up the fact that they were drunk at the time of the accident and fled the scene by falsifying the accident circumstances when making a claim, said Durban-based forensic accident investigator Craig Proctor-Parker.

“It doesn’t take us long to come up with conclusive proof that the accident could never have happened where the insured claims it did, and that leads to the entire claim being repudiated on the basis of misrepresentation,” he said.