When insurers turn into Sherlock Holmes

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MUNMUN NATH

You would have heard of common insurance claims such as accidental damage or theft. But sometimes, insurance claims can be rather funny or weird. For example, one woman in the US made a claim for personal accident coverage on finding a mouse in her soup – her claim was rejected because the investigation showed there was no soup in the lungs of the mouse, hence it could not have been cooked in it. Or, the claim by a bride in Italy whose wedding dress caught fire in the wedding barbecue, but was compensated by the insurance company.

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Another famous anecdote goes something like this – a lawyer got his cigars insured against fire and then claimed compensation after they were lost in “a series of small fires.” The insurance company obviously refused to pay since they stated that the man had smoked the cigars himself. However, the judge ruled in favor of the lawyer since the contract did not define what was an “acceptable fire.” The company had to pay the lawyer his claim but eventually had him arrested on account of ‘arson!’

Now you might be wondering how insurance companies distinguish genuine claims from fraudulent ones. There are typically two kinds of fraud – hard fraud (completely fraudulent) and soft fraud (genuine claims with some fraudulent aspects). If you say your insured property was stolen when it was lost due to your mistake – that would be hard fraud. Soft fraud would be, if you had a genuine accident but you misrepresented your repair estimate. Many large insurance companies use very sophisticated data analytics techniques for detecting fraud.

They may also maintain a list of “suspicious loss indicators” that are automatically flagged when someone submits an online claim. They may also hire private investigators who follow a client’s tracks a la Sherlock Holmes!

Insurance fraud is a very critical issue for the industry – according to a report from the “Philippine Insurers and Reinsurers Association” (PIRA), P1 billion is lost to car insurance fraud only each year. Typical fraudulent claims include fake car theft, staged crashes, and fictitious car repairs and involve individuals, as well as organized gangs. This has driven the car insurance industry to implement stronger anti-fraud mechanisms. Detection of fraud could lead to the denial of all future claims.

As a customer, to avoid your legitimate car insurance claims being flagged as suspicious, please take clear pictures of the damage, submit honest affidavits on who was at fault, and report genuine repair estimates. For more information on this topic, please visit https://www.moneymax.ph/car-insurance/claim

Munmun Nath is managing director at www.MoneyMax.ph, a financial comparison website to help Filipinos save money through free and fair information. Follow https://www.moneymax.ph/blog/ for more such personal finance stories.

MUNMUN NATH

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