Request a Demo

When household budgets tighten: opportunistic fraud and the claims that start out genuine

By

KBS

Industry experts

Share Online

As the year draws to a close and household budgets come under their usual seasonal strain, insurers in New Zealand are being open about a trend they are seeing. The Insurance Fraud Bureau of New Zealand said in its review of 2025 that its data shows insurers reporting a noticeable increase in fraudulent claims driven by financial pressure, and a year earlier it noted that some members had reported rises in theft and damage claims over the Christmas period.

It is a pattern Australian insurers will recognise, because the type of fraud that tends to rise when budgets are stretched is already the most common kind claims teams deal with, and one of the hardest to handle well.

Fraud that begins with a real event

The Insurance Council of Australia separates insurance fraud into two broad types. Premeditated fraud is planned from the outset, often by organised groups. Opportunistic fraud, which the ICA describes as the most common form, happens when someone with a genuine policy or a genuine loss inflates or bends the facts in their favour.

In practice, that might mean adding an item to a real theft claim, overstating the value of damaged property or including losses that have nothing to do with the original event. The ICA reported that its members detected $560 million of opportunistic fraud in motor and property claims in 2023, and it estimated undetected fraud at around $400 million a year.

Because the event itself is real, the claim arrives with a plausible story attached, and that is what makes this type of fraud such an everyday challenge for claims teams.

Why financial pressure changes the picture

When money is tight, the temptation to round a figure up or add something that “should have been covered” becomes easier to rationalise. Attitudes suggest the public already sees this behaviour as fairly normal. In the IFB’s most recent fraud survey, 61% of New Zealanders said they believe inflated claims for lost or stolen items are common.

The tools available to claimants have also changed. In Gallagher Bassett’s 2026 survey of 250 senior insurance leaders across Australia, the UK and North America, 62% of Australian insurers said technology-enabled fraud and AI manipulation are significantly increasing cost pressures, and 70% said they are using AI and digital tools to counter fraud-related challenges. Inflating a claim once meant finding a convenient receipt, whereas now a convincing one can be produced in minutes.

Why it is hard to detect

Premeditated fraud often shows itself across claims, through the same people, vehicles, addresses or suppliers appearing more often than chance would allow. Opportunistic fraud usually sits inside a single claim, in a value that doesn’t fit, an item that doesn’t match the event, or a document that doesn’t quite check out.

Many of the usual warning signs don’t apply when the loss is genuine. Detection relies instead on validating claimed values against market data, comparing the make-up of a claim with similar claims and spotting where the reported event and the claimed loss don’t line up. Our Knowledge Hub entry on exaggerated claims covers these signals in more detail.

The fairness question

Financial pressure doesn’t only affect people who are tempted to inflate a claim. It can affect honest customers too, and they are the majority. Someone who has lost belongings in a burglary may simply overestimate what those belongings were worth, or make a mistake in good faith, at exactly the time they most need a claim paid quickly.

That is why tightening controls across the board is rarely the right response. More referrals and more alerts slow genuine claims down and place more pressure on investigation teams without necessarily finding more fraud, a point we explored in More alerts don’t mean better fraud detection.

The rules reflect this balance. Under the General Insurance Code of Practice, an insurer that appoints an investigator must tell the customer within five business days, and insurers must review their non-genuine claims indicators at least once a year to make sure they remain relevant and don’t discriminate. Under section 56 of the Insurance Contracts Act, a court can order a fair payment where only a minimal or insignificant part of a claim was fraudulent.

What this means for fraud teams

The practical goal is to get better at telling the difference between a claim that needs a closer look and one that simply needs paying, rather than looking harder at every claim. That depends on scoring that prioritises the claims most likely to warrant attention, on validation that checks values and documents without adding friction for everyone else, and on clear explanations so that claims handlers and investigators understand why a claim has been flagged.

It also depends on learning from outcomes. Feeding the results of confirmed and dismissed cases back into detection models helps reduce both missed fraud and unnecessary delays for honest customers over time, which matters all the more when the pressure on household budgets is likely to persist. At kbs Intelligence, this is the balance our scoring and triage is designed to support, helping fraud teams focus their time where it matters while genuine claims keep moving.

Sources

Posts you may be interested in…