With a unit of anti-fraud police officers on the look out, it doesn't seem like a good idea to lie about insurance claims. The Internal Revenue Authority (IRA) may have made it harder for policy holders to commit fraud but the fact remains that everybody lies.

With your back against the wall and enough pressure on your shoulders to kill an ox, hiding the truth becomes second nature. According to University of Toronto Psychologist, Kang Lee, lying is a sign of cognitive development. Successful liars are able to assess multiple situations faster than their truthful counterparts.

Insurance companies may not care about your cognitive development, but they tend to use theirs a whole lot more. They customize their policies in such a way that their profits outweigh the claims they pay to their policy holders. This ensures that they have specific covers to shield them from losses.

Insurers know that clients who make frequent hospital visits will cost them more money. These high risk customers are more than likely to cost them a fortune. This is why packages are made based on a person’s medical history. The healthier you are, the less you pay. It may look like a con-man’s game but that’s exactly how health insurance works.

The same deal applies to motor insurance. If your car is in top condition before you apply for coverage, you will pay less premiums than a policy holder with a high-maintenance vehicle. If your vehicle is damaged after signing the contract, the insurer will pay for the repair expenses. In extreme cases where the car is damaged beyond repair and the policy holder has a comprehensive cover, then they are entitled to some form of monetary compensation.

It is this kind of system that has pushed some people into lying when filling out insurance forms. A person with a history of high blood pressure will conveniently fail to mention it in their medical insurance form so that they pay less premiums. A vehicle owner with a faulty engine will claim that all the parts are brand new so that he doesn't have to pay for repairs.

Some home owners have even burnt down their own houses for the sake of property damage claims. Some may get away scott free but those that don't face the following consequences:

No Claims for You

One of the first consequences of lying to your insurer is a denied claim. The insurance company will not compensate you for your damages. You will also face more scrutiny from insurers when you make other claims in the future.

You Can Lose Your Policy

In some situations, the insurer can terminate your policy if your claims are not legitimate. This means that, on top of losing your cover, you could also lose all the money invested in the scheme.

Higher Premiums

Assuming the insurer does not cancel your policy, you may face higher premiums. Failing to report a broken headlight on your vehicle before signing up for a policy could lead to more costly insurance premiums once the insurer finds out you withheld this information.

Bad Reputation

One of the worst things about getting caught in a lie is the aftermath. Known liars are forced to deal with mistrust and predetermined assumptions. Insurance companies keep a record of their clients’ activities for the sake of future reference. These records can be accessed upon the request of other insurers. Applying for a new policy therefore becomes a problem once other companies check the person’s past records.

Imprisonment

Insurance fraud is a criminal offense. As such, those who get caught are likely to face prosecution. According to Insurance Regulatory Authority (IRA) Chairman, Steve Mainda, there are no specific penalties for insurance fraud. Defaulters are still prosecuted if the insurer pushes for a criminal suit. Jail sentences and fines depend on the severity of the offense and the judge's final decision. Speaking during the launch of the anti-fraud unit earlier this year, Mainde said that the government should institute definitive laws in order to deter the crime.