All you need to know to avoid insurance fraud
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By Anton Keet
The pay-out from life insurance, or disability and dread disease cover, can help you and your family cope financially in difficult times. But when an important detail is not disclosed - even if this was not intentional - this classifies as insurance fraud. And it can lead to unfavourable outcomes that will subsequently impact your family’s financial future.
Here’s how to make sure you have disclosed everything important, and what to do if you are worried you might have missed something.
Defining insurance fraud
When a policyholder claims for benefits that they are not entitled to, that’s insurance fraud. This might be deliberate - falsifying documents, for instance - but it may also be the unintentional non-disclosure of important information.
As much as 60% of the long-term insurance claims declined by the Association for Savings and Investments SA were not paid because there was non-disclosure of some form, by the insured. In many cases, inadvertently. It really is important then to disclose everything. When it comes to full disclosure, there is never too much information. We encourage you to think through your claim’s history, your medical conditions history - as well as that of your family.
Key health, lifestyle, and financial information to disclose.
Most insurers need a full and accurate picture of your health and lifestyle – past and present as well as an HIV test when you apply for the insurance. This is what they base premiums and the policy on.
Most insurers will however also require you to keep them updated of any changes to your health and will also ask about your health when there is a claim on a policy. Be sure to ask your insurer what health information they need to know and when. How often you should provide updates and ask whose responsibility it is to provide these updates.
Examples of such health information can include:
- Being diagnosed with a chronic illness such as diabetes, hypertension (high blood pressure), high cholesterol or heart disease
- Having an illness, you need ongoing medication for such as asthma or arthritis
- Depression that requires treatment or care
- Chronic pain such as back pain that you regularly self-medicate for
- Previous illnesses such as Covid-19, cancer, or a heart attack, even if you have fully recovered
- Family history of serious illnesses such as cancer or heart disease
You will also need to give your insurer relevant information about your lifestyle when you apply for cover and then again during your policy contract. So, for example, if you apply for a policy in 2010 and take up cave diving in 2020, you need to tell your insurer in 2020 that you now have a dangerous hobby. On the other hand, keeping your insurer informed can also help you reduce premiums. For example, if you stop smoking your premium can reduce by nearly half!
Examples of such lifestyle information you should update and consistently disclose can include:
- How much and what kind of alcohol you drink
- Smoking status – including vaping, hubbly and using non-tobacco products such as cannabis
- Your weight and height
- Any dangerous hobbies and hazardous pursuits such as skiing, cave diving or rock climbing
- Any personal and work travel, especially outside the borders of South Africa
- Your occupation – what work you do and how far you travel to and from work daily
Finally, your financial overview is also important. Your insurer needs a brief but accurate picture of your finances to make sure you are not over-insuring. Although this is rare, it can happen and can result in claims being rejected or claim pay-outs being reduced. Providing your insurer with a regular personal balance sheet is a good financial and insurance habit to have.
- Give too much information, rather than too little!
- Keep a health file, with all your health history – as we are all human and can forget operations or health issues, we may have had a decade ago.
- Have regular health checks and update your insurer on any changes.
- Be honest about your health and lifestyle. For example, adding two centimetres to your height and take five kilograms off your weight! It’s easy to do on paper but can have serious effects for yourself and your family if a claim is denied.
You can always ask your financial advisor or insurer if you are unclear on what you need to disclose and when. Or if after reading this, you are worried – simply chat to your insurer or advisor. It’s always better to be safe – so ask if you are unsure. Updating your policy disclosure regularity should be viewed as a critical part of effective financial planning.
Anton Keet is the Head of Risk Services at 1Life