For businesses wanting to see their insurance premiums fall, it will not come as the most welcome news that insurance fraud costs the industry as much as $2 billion per year.
This revelation comes during an interview with QBE Claims Investigations Specialist Geoffrey Brown, and reported by Insurance and Risk Professional. With the recent 2015 ANZIIF Claims Convention predicting that between 5 and 10 per cent of all claims are fraudulent, it is putting undue pressure on insurers – and, subsequently, business insurance premium rates.
“On current figures, the ICA (Insurance Council of Australia) estimates insurance fraud costs in excess of $2 billion a year,” Mr Brown explained in the August 12 report. “What is not known is the potential insurance fraud following a catastrophic event. Although, based on conservative estimates, even 1 per cent would have a significant impact on the cost of claims.”
The QBE expert said that the massive amount is mostly a result of a high volume of low-value (and therefore low-risk) claims, which many home and business owners try and sneak through after a catastrophe.
To compound the matter, the cost of catastrophe is creeping ever higher. Earlier this month, Suncorp Group released its annual financial review for 2014/15, finding that its allowance of $595 million for natural disasters soared well above expectations. In total, more than $1 billion was paid out by the insurer on such claims.
It was back in May when the ICA reported the crossing of an annual landmark in terms of natural disaster claims. Following the month’s heavy rain in Queensland and northern parts of NSW – the fifth catastrophe of the year – more than 131,000 claims had been made on home and business insurance, amounting to payouts of over $1.35 billion by insurers. Fraud will no doubt push this even higher should trends continue.
With so much at stake from a natural disaster, it pays to be prepared. Speak with your insurance broker to secure everything from business interruption cover to home and contents.