Swindling your insurer can be an expensive business

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