James Dalton, Director, General Insurance Policy, ABIWhen I was about four or five years old, my brother and I were playing catch with a tennis ball in the living room. I threw the ball to my brother but, foretelling the future of my sporting prowess, it was a shocker, sailing right past him and straight towards a vase sitting on the mantelpiece.
In one of those moments that feels like an eternity, I remember watching as the ball hurtled towards the vase as I hoped not to see it topple to the floor with the horrendous smash into thousands of irreparable pieces. Of course, the inevitable happened.
My brother and I knew we were going to be in trouble. We had to think of something to explain to Mum the pile of glass on the floor. In a moment of what seemed like pure genius, we invented a story that, because we wanted to help her out around the house, we were dusting the mantelpiece and the vase had broken during our ill-fated cleaning endeavours.
Unsurprisingly, she didn’t believe us, not least because we’d forgotten to hide the tennis ball which was lying less than ten feet away. In what felt like the worst punishment ever, we weren’t allowed to watch the Hoff in Knight Rider that night.
I was remembering this incident last week when I read the decision of the Supreme Court in the Versloot Dredging case.
The Court’s decision draws a distinction between the “fraudulent claims rule”, where a claim is fabricated or dishonestly exaggerated and “collateral lies”, which are immaterial and irrelevant to an otherwise honest claim. If mum had made an insurance claim repeating our “dusting” story, she would have told a “collateral lie” to her insurer.
Drawing a distinction between “collateral lies” and “fraudulent claims” may be the considered view of their Lordships from a legal perspective, but how can that possibly be the right outcome from a societal viewpoint?
I don’t think it can be. Some consumer groups have said that our stance is unreasonable, that insurers try to wriggle out of paying claims and that they expect too much from customers as part of the claims process. But the evidence paints a different picture. Through our increased transparency as an industry, we’ve shown claims payout rates are generally high. Where they are lower, in domestic property insurance for example, we've taken active steps to produce a guide to explain to consumers what's covered, what's not and how to make a hassle free claim.
And I don't think insurers are asking too much of their customers in expecting them to tell the truth when applying for insurance or making a claim. Insurers continue to crack down on fraud so that premiums for honest consumers are fairer. This will not be assisted by insurers expending further time and cost understanding what particular type of lies consumers may have told which may mean some claims take longer to pay.
Will this decision fundamentally alter insurer claims handling? Probably not. But the more pertinent point is what consumers will make of this decision and the associated publicity. The concern I have is that this decision sends consumers completely the wrong message: that lying to an insurer is somehow okay.
Will consumers understand the intricacies of the legal distinction that has been drawn? I don’t think so. It will be all too easy for a “collateral lie” to slip over the line to become fraud which may result in claims being declined and potential criminal sanctions.
And the decision flies in the face of all the work that the Government and industry have been doing for many years with insurers, academics, claimant lawyers and consumer champions to get the message out that fraud is not a victimless crime.
Lies are lies and honesty is always the best policy. Something my brother and I had to learn the hard way. James Dalton is Director, General Insurance Policy at the Association of British Insurers (ABI)
The decision in the Versloot Dredging case, the industry’s on-going fight against personal injury fraud and the Government’s proposed Autumn Statement reforms will all be considered in the fraud breakout session, supported by Carpenters Law, at the ABI’s Motor conference taking place on 18 October 2016, supported by DAC Beachcroft.