Home / Publications / Insurance Legislation Zone / Insurance Act 2015 / Fraudulent Claims
Table of contents
  1. Third Parties (Rights against Insurers) Act 2010
  2. Insurance Act 2015
    1. Fair Presentation
    2. Policy Terms
    3. Fraudulent Claims
    4. Late Payment of Claims
  3. Consumer Insurance Act 2012

Fraudulent Claims

The Insurance Act sets out a statutory regime for fraudulent claims which applies to both commercial and consumer insurance.

If a fraudulent claim is made the insurer will not have to pay the claim and can recover anything already paid to the insured in respect of the claim. This reflects the previous legal position.

The Act gives the insurer an additional remedy. The insurer may, by giving notice to the insured, treat the contract as terminated from the date of the fraudulent act without returning premium. A “fraudulent act” is the behaviour that makes the claim fraudulent and may happen after a loss has occurred or a claim been notified. For example, an insured may make a genuine claim and subsequently add a fabricated head of loss. In that situation the insurer can terminate the contract from the date of the later fraudulent act.

If the insurer gives notice that it is treating the contract as terminated, the insurer remains liable under the contract in respect of any relevant event occurring before the fraudulent act. “Relevant event” means the trigger for the insurer’s liability under the contract. This will depend on the wording used in the policy and could, for example, be the notification of a claim or the loss occurring.

Group insurance

The Act sets out the remedies that apply where a fraudulent claim is made in the context of group insurance. Group insurance means a policy that is taken out by a policyholder and provides cover for individuals or entities that are not parties to the contract. The policy may or may not also provide cover for the policyholder.

If a fraudulent claim is made by one of the beneficiaries under the policy, the insurer has the same remedies against that beneficiary as it would have against an insured that made a fraudulent claim. The insurer will not have to pay the claim, can retain premium paid by (or on behalf of) the beneficiary, and give notice that it is treating the insurance cover for that beneficiary as terminated. If the insurer decides to treat the cover for the beneficiary as terminated, it must give notice to both the beneficiary and the policyholder.

The insurer’s remedies against the fraudulent beneficiary do not affect the cover provided under the contract to other parties.

Contracting out

For commercial insurance contracts (but not consumer), the parties can contract out of the fraudulent claims provisions and substitute their own agreed terms. If, however, a term would put the insured in a worse position than they would be in under the Act, the insurer must meet the Act’s transparency requirements.

This means that, to be effective, the term must be:

  • sufficiently drawn to the insured’s attention before the contract is entered into; and
  • clear and unambiguous as to its effect.

Key contacts

Alex Denslow
Alex Denslow
Partner
Head of the CMS Insurance Group
London
T +44 20 7367 3050
Tristan Hall
Tristan Hall
Partner
London
T +44 20 7367 3105

Expertise

Insurance Insurance Corporate Insurance Regulatory Life Assurance