The opportunity may be tempting, but the consequences for those looking to make easy money can be extremely serious – and not just financially.

Insurance fraud is no minor offence. It is like stirring up a hornets’ nest: the consequences in terms of civil or criminal proceedings can be stingingly painful.

Policy will be cancelled retroactively

According to the law, the outcome of filing a fraudulent claim¹ is clear: the insurance company is no longer bound by the policy in relation to the policyholder. But what does that mean in practice? Quite simply, the insurer is released from its contractual obligations at the moment the fraud is committed. In other words, the fraudster cancels the policy by virtue of the fraudulent act. Once the insurer finds out the truth, it will take steps to cancel the policy with retroactive effect.

Insurance payment will be forfeited

No policy, no pay-out: it’s as simple as that. Cancellation of the policy means that all claims, including those for actual losses sustained, are refused.

It is likely that the policyholder will have to repay any previous payments

Any claims reported between the time the fraud was committed and the time when the insurer found out are no longer covered, as the policy no longer exists. All previously paid claims must be refunded. In cases where the insurer has had to pay for investigations, these could also be charged to the fraudster.

Obtaining a new policy could be complicated

When we take out an insurance policy, we often have to answer a number of questions that enable the insurance company to assess the risk – and offer an appropriate premium – or refuse cover altogether. Protecting honest policyholders is what insurers do, but they will probably think twice before insuring someone with a shady past. In a nutshell, lying when you apply for insurance is a bad idea. If it is found that you have deliberately concealed information,² the policy could be cancelled and any claims paid to date would have to be refunded.

You could end up behind bars

Going from victim to accused in a police station is an experience many policyholders have had. The insurer does not even have to file a lawsuit because fraud³ is a criminal offence. In the private insurance sphere, a mere falsehood can already be considered an act of ‘elaborate’ deception⁴ in the eyes of any judge considering a charge of fraud. If this is the person’s first time, they will be fined and get a criminal record. In the case of repeat offenders, the aggravating circumstance of professional fraud may be considered by the court, depending on the seriousness of the offence and any regular income generated over a material period of time, potentially leading to a custodial sentence of up to 10 years. It is not uncommon to read in the press of custodial sentences of more than 3 years, which means actual prison for the person, as suspended sentences cannot apply in this case.

Fraud never pays. With AI now playing detective as well and insurers hot on the heels of fraudsters (who inevitably leave a trail), the chances of being caught are massive. XpertCenter deals with several thousand cases of suspected fraud every year and is surprised at the number of people who think they can get away with it.

¹ Art. 40 of the Insurance Policies Act, Fraudulent claims (IPA, SR/RS 221.229.1)

² Art. 6 of the Insurance Policies Act, Concealment (IPA, SR/RS 221.229.1)

³ Art. 146 of the Criminal Code, Fraud (CC, SR/RS 311.0)

⁴ Supreme Court Report 6B_184/2017 of 19 July 2017

Drafting or falsifying a document to substantiate a false claim is a dangerous game. Your insurer is likely to find out and there will be consequences to pay. XpertCenter verifies a massive volume of documents every year.

For some people, an insurance claim can spell a chance to make money at the expense of other policyholders. When a spoken untruth needs supporting evidence, purchase receipts, invoices or other documents will sometimes be tampered with or even created from scratch. At times a higher purchase price will be quoted to obtain a more juicy payout, or maybe only the currency will be changed. At other times the date may be altered to secure repayment in the event the risk was not covered beforehand. Another ruse is changing the person’s name from someone who was not insured to someone who was. The inventiveness of dishonest policyholders seems to know no bounds. Checks focusing on tell-tell signs are therefore implemented, verifying that the submitted information both gives the full picture and is rigorously authentic.

Nowadays, manual checks are supplemented by computer-based analysis. One policyholder who reported a burglary was unmasked this way. When the insurer visited the location, the policyholder was asked to present any paperwork proving that she had owned the stolen jewellery and other items and how much they were all worth. She thought that she no longer had these proofs but would look for them anyway. The following day, she submitted several photos found on her phone. The photos were in fact too authentic, proving the exact models and thereby their value too, and that they had indeed been owned by the policyholder. But it was also shown that she still had these items in her possession, as the computer programme indicated that the images were taken a few hours after the insurer’s visit. Her policy was terminated with retroactive effect, she lost all claims for indemnification – even for the items that were actually stolen – and was prosecuted.

She will now have trouble taking out a policy with another insurer. The consequences of insurance fraud are for life, so it’s never worth the risk.

Cyber-insurance for households, small businesses and large companies is nothing new. But as with other types of coverage, this line of insurance is equally exposed to fraud risk. And as always, prevention is better than cure.

Cyber-insurance fraud was recently studied in an academic context. A comprehensive analysis of the terms on offer to small and midsized companies by major providers brought to light approximately 15 techniques that can be exploited for the purposes of fraud.

First of all, it is not surprising to find some well-known tricks being used to obtain fraudulent settlements in cyber-insurance, for example, the falsification of accounting records used for calculating an operating loss caused by cybercriminals. Secondly, new specific types of conduct have been identified, from deliberate malware creation and concealment of back-up copies to ransomware simulations. And that is only a few examples.

Detection and investigation methods have also been assessed by XpertCenter, so that we’re now fully prepared to handle this type of threat. If you would like a precise assessment of the threat to your company from cyber-insurance fraud, simply get in touch with us.

Roughly 10% of benefit payouts are fraudulent. We use special indicators to detect cases of fraud.

According to Swiss and non-Swiss industry organisations, some 10% of benefit payouts are fraudulent. These massive amounts of wrongfully assigned income are prejudicial to society as a whole.

To reduce such occurrences, we screen benefits in payment, using tangible indicators to highlight possible cases of fraud. These indicators are usually those that have already come to light in past fraud cases, enabling them to act as a warning sign here and now.

Financial problems, family-related issues, reckless spending: those of just some of the indicators, which can also be specific to a given situation. Targeted research can then supply the particulars of each case.

If one of our checks raises suspicion of fraud, we propose further investigative measures that will establish the facts and confirm or refute the suspected wrongful conduct. We carry out these measures ourselves, at all times keeping an open mind.

Detect and prove fraud