Making Insurance Claim Impossible

When her car was stolen and she lodged a claim on her insurance policy, Nina*, a Sydney mother-of-two, thought it would be a smooth process. Insurance, after all, is supposed to give you a peace of mind.

She was shocked her insurer launched a fraud investigation. What's worse, despite having no criminal history, the private investigator probed her about a rape earlier in the year that led to dealings with the police and to giving birth to the child of her attacker, who was never found.

During the interview, the investigator hit the stop button and asked seemingly irrelevant and invasive questions about the rape. Nina, a single parent, felt harassed.

"Can you remember what the guy looked like? What happened to you during the incident? Why did you decide to keep the baby afterwards?" he interrogated. Nina is among tens of thousands of claimants each year who are suspected of committing fraud and subjected to investigations by insurance companies and third party investigators.

The Financial Rights Legal Centre said too many innocent policyholders are being "treated like criminals", routinely feeling bullied, harassed and intimidated.

The insurance industry said 8-9 per cent of claims are fraudulent, costing them $2 billion a year and and lifting premiums for honest policyholders.

In a new report, Financial Rights said a lack of standards has led to investigators using unscrupulous methods to extract information - for example, conducting five hour interviews, demanding to be "friended" on Facebook and urging claimants to sign a blank authority form. It said nearly one-quarter of calls to its insurance arm now come from distressed policyholders being investigated.

In the incident involving rape, they asked about previous sexual history, it seems like it was to intimidate that person. Our concern is a consumer should be able to say, 'I don't want to answer that, until you tell me why it's relevant."