Have you committed insurance fraud without knowing it?

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 claims being declined. Here’s how to make sure you have disclosed everything important, and what to do if you are worried you might have missed something.

What is 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.

Non-disclosure means that the life assured forgot or neglected, intentionally or unintentionally, to tell the insurer something important about their health, lifestyle, work and finances. 60% of the long-term insurance claims declined by the Association for Savings and Investments SA were not paid because there was non-disclosure by the insured, sometimes inadvertently. It really is important to disclose everything to your insurer. Failing to do so classifies as insurance fraud, which is a crime, and it can also result in a claim being denied.

This applies to all long-term insurance products, including life cover, dread disease cover and disability insurance. You need to disclose all the relevant information required of you.

With busy lives it can happen that you forget to mention something your insurer wants to know. Make sure that you have disclosed everything that is required, so that when the time comes to claim, there are no problems.

What to do if you are worried that you’ve committed fraud?

At the end of this article we’ve outlined what your insurer needs to know about your health and lifestyle. Go through it carefully and make a list of anything important that you might have forgotten. Contact your insurer or financial advisor and tell them you need to go through your application to see if you have forgotten any important details.

And then do a check once a year to make sure your lifestyle information is still up to date.

Most people qualify for cover

There are many reasons why people don’t disclose information to their insurers. Sometimes they just forget. Or they didn’t understand the question. Sometimes they want to paint a more favourable picture of their health because they are worried that if they tell insurers about their weight or drinking habits or that a parent had heart problems, they won’t be able to get insurance. This simply isn’t true. There are very few people whose applications for long-term insurance are rejected. Even if you do have a medical condition or illness and it is well-managed, you may be able to get insurance depending on your overall risk profile. In the event of really poor health, the premium may be higher, or you may be excluded from claims for certain events related to a health condition, or you may be covered for accidental causes only. However, even this is better than having a claim rejected because you neglected to tell your insurer something important.

What your insurer needs to know about health and lifestyle

Your insurer needs a full and accurate picture of your health and lifestyle – past and present. Here’s what you need to know.

Health information

Most insurers, including 1Life, need health information, and an HIV test if required, only when you apply for insurance. Some will 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.

Health information includes, but is not limited to:

• 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

Lifestyle information

You need to give your insurer relevant information about your lifestyle when you apply for cover and then during your policy contract. So, 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 have a dangerous hobby. Be sure to ask your insurer what health information they need to know and when.

Keeping your insurer informed can also help you reduce premiums. For example, if you stop smoking your premium can reduce by nearly half!

Lifestyle information includes:

• How much and what kind of alcohol you drink
• Smoking status – including vaping 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 travel outside the borders of South Africa

Make sure you tell your insurer everything

• Take some time when you apply to go through your life (think back to different ages and places you stayed) so you can remember important health events
• Keep an ongoing health file with all your health records – what health event happened when, from an annual GP check and prescriptions to hospital visits

Top tip: Be honest about your health and lifestyle. Don’t add a bit here or take away a bit there, for example add 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.

Work

Where, when and how you work can make a difference to your insurance premiums. For example, a motor vehicle test driver will face more risk in their daily job than an office worker, which means their premiums may be higher. You need to keep these updated throughout your policy contract, so let your insurer know of any changes.

Work information includes:

• Your occupation – what work you do
• How much travelling you do for work, apart from travelling to and from work
• If you change jobs or start travelling more or less for work

Money

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.

When you apply for a policy you need to tell your insurer your annual income and, if asked, any other details such as a copy of your balance sheet.

Ask if you are unsure

You can always ask your financial advisor or insurer if you are unclear on what you need to disclose and when. It’s always better to be safe – so ask if you are unsure. And take your time to remember as much as you can when you are applying for cover and updating your policy.