Insurance fraud will worsen in the coming months as the coronavirus recession bites deeper, industry watchers say.

Financially strapped customers have targeted insurers in past economic slumps, submitting fake claims or exaggerating losses suffered, and it is not expected to be different this time round.

“We know that financial hardship can lead to an increase in insurance fraud,” Insurance Fraud Bureau New Zealand said. “Trends from recent recessions have shown that fraud often starts increasing later in a financial crisis.”

The bureau, an Insurance Council of New Zealand initiative launched last year, made the assessment yesterday as latest economic data showed the country is officially in recession as gross domestic product contracted a record 12.2% in the June quarter.

Claiming for “extra” items is one of the most common methods some policyholders use to try to scam insurers. The claims are genuine but they see an opportunity to try to get “more” from insurers, the bureau said.

Another often-employed tactic involves making up claims such as staging car thefts or house burglaries.

The industry is also targeted by so-called ghost brokers who present themselves as genuine representatives of insurers and offer fake products to unsuspecting consumers.

The Association of British Insurers says the 2008 recession saw a 17% increase in fraudulent claims worth £730 million ($1.3 billion) from the previous year.

In New Zealand about 10% of claims lodged in 2018 are believed to be fraudulent, costing the industry some $NZ614 million ($570 million).

An insurance fraud investigator in Australia told insuranceNEWS.com.au “in any economic slump, people who may have lost their jobs or reduced working hours” may be financially motivated to make false claims.

New Zealand Insurance Law Association is similarly expecting a sharp spike in fake claims as more people try to cheat insurers, wrongly assuming their actions are nothing more than a “victimless crime”.

“It’s highly likely New Zealand will see increases in fraudulent claims as the economy struggles to recover from the ongoing ramifications of the pandemic,” President Myles Noble said.

“People may think life’s tough living through a global pandemic, but dishonestly claiming against an insurance policy will make it a lot harder.”

He says those who think they’re “just getting back what they’ve paid for all these years” in premiums to insurers are wrong.

“Those of us at the industry know that’s not true,” Mr Noble said. “Everyone with a policy has to pay for insurance fraud.

“A portion of every premium is to cover claims made through deception or dishonesty.”

As insuranceNEWS.com.au has reported, the Insurance Council of Australia is working on an "innovative" new fraud solution.