Introduction
Exaggerated claims are among the most common forms of opportunistic insurance fraud. They occur when a genuine loss is inflated — in value, scope, or impact — beyond what actually happened. Unlike fabricated or staged claims, an exaggerated claim begins with a real event.
Because the underlying incident is genuine, exaggerated claims sit in a particularly difficult area of fraud detection. The line between honest recollection, optimistic valuation, and deliberate inflation is not always clear-cut.
What Exaggerated Claims Mean (Plain English)
An exaggerated claim is a real claim that has been inflated. The customer experienced a genuine loss, but the claim they submit goes beyond what they actually lost.
Examples include:
- Adding items to a household theft claim that were not actually stolen
- Overstating the value of damaged property
- Inflating the severity or duration of an injury
- Claiming for losses that are unrelated to the underlying event
Why Exaggerated Claims Are Common
Exaggerated claims are more common than fabricated ones for a simple reason: the underlying event provides a plausible basis for a claim. Customers may rationalise inflation as recovering past premiums, compensating for inconvenience, or making up for items they believe should have been covered.
This makes exaggerated claims an everyday challenge for Australian claims teams, rather than an exceptional one. In NSW, exaggerated CTP claims are explicitly identified by SIRA as one of the most common forms of CTP fraud.²
The Detection Challenge
Detecting exaggerated claims is more nuanced than detecting fabricated ones. Because the underlying loss is real, many of the traditional signals of fraud — such as missing documentation or unverifiable circumstances — do not apply.
Effective detection typically relies on:
- Validating claimed values against external market data
- Comparing claim composition against similar historical claims
- Identifying inconsistencies between the reported event and the claimed loss
- Reviewing supplier relationships and pricing patterns
Balancing Fairness and Control
Exaggerated claims sit at the heart of the balance between fraud control and customer experience. Honest customers may legitimately overestimate the value of their possessions, or make small errors in good faith. Treating every inflated figure as fraud risks alienating genuine customers and damaging trust.
The General Insurance Code of Practice 2020 sets minimum standards for fair claims handling, including requirements around investigation, communication, and customer treatment. Insurers that exceed these standards in their handling of suspected exaggeration tend to achieve better outcomes for both fraud control and customer experience.¹
Role of Analytics and Explainability
Modern claims fraud platforms combine value validation, network analysis, and behavioural signals to identify probable exaggeration without unnecessarily delaying genuine claims. Explainability is essential. Investigators, claims handlers, and customers should all be able to understand why a claim has been flagged for further review.
Over time, feedback from confirmed and dismissed cases improves model accuracy, reducing both missed fraud and unnecessary friction for honest customers.
Related Topics
- Crash for cash
- Staged accidents
- Claims leakage
- Total loss fraud
Sources & further reading
¹ Insurance Council of Australia — General Insurance Code of Practice 2020, Parts 8 and 15
² NSW State Insurance Regulatory Authority — CTP insurance fraud guidance
³ Australian Financial Complaints Authority (AFCA) — approach to fraud allegations
⁴ Insurance Fraud Bureau of Australia — industry fraud trends
