Claim declined for fraud or non-disclosure

We receive a number of phone calls and inquiries from people whose insurance claims have been declined for making untruthful statements.

Please don’t lie to an insurance company. The consequences are disastrous. Not just that your claim is declined (that’s the least painful penalty) but:

  • Your other policies will be cancelled
  • You won’t be able to buy other insurance (almost never) again
  • If you have a house, your bank will call on your mortgage and sell your house if you can’t find insurance.

Insurance claims are noted on a national claims register, and most insurers can see the details of those claims. Claims stay there for 10 years. However, claims that have been declined or flagged (such as fraudulent claims) remain on the register indefinitely.

So here are some of the scenarios that have come to us:

  • Son on a learner’s licence driving the car, involved in an accident. The father told the insurance company that he was driving, not the son. Claim declined, and vehicle policy cancelled, along with house and contents policies. The bank gave them 30 days to find insurance for the house or they would sell the house as the homeowner was in breach of the mortgage covenants to keep the house insured.
  • Person purchased expensive mountain bike but had no contents insurance. Bike got damaged in an accident. Person purchased contents insurance then made a claim for the bike. Claim declined. Person was just in the process of buying first home, could not proceed because could not buy insurance for the house.
  • Renter suffered genuine loss to contents but then claimed additional items not stolen. Claim declined, unable to find insurance cover again.
  • Homeowners had car and house insurance but no contents insurance. Suffered a burglary, and decided to purchase a policy after. Two days after they had another burglary (the window was still broken). They didn’t inform the insurer of the previous burglary or the fact that window still not fixed. Claim declined, contents policy cancelled, along with the house and car policy. They had a brand new Tesla vehicle, and no insurance. They had 7 days to find insurance for their house or the bank was going to hold them in breach of their mortgage obligations.

Policyholders have an obligation to inform an insurer if they had a claim declined or a policy cancelled. So, switching insurers without informing them might get you a policy but they wouldn’t pay at claim time because of the non-disclosure. So, there is no workaround this. Please be completely truthful (not marginally truthful) when dealing with an insurance company because the consequences can be significant and long-lasting. You need to tell the truth both at the time you purchase insurance, and at the time of a claim.