Over-insurance

How it works

Over-insurance is cover the insured’s financial position cannot justify. The sum assured is far above what income and dependents would support, or the premiums are out of proportion to the payer’s means. On its own it can be a sales or underwriting failure, but it is also the setup for several fraud schemes.

The usual pattern is stacking. A policyholder, often with an intermediary’s help, takes out several smaller policies across products or insurers, each below the level that triggers financial underwriting or medical evidence. Funeral and accidental-death cover are common choices because they are sold with light underwriting. A claim follows, through a non-disclosed illness, a suspicious death or a faked one.

Each policy is within limits and each premium collects, so no single proposal raises concern. The exposure becomes visible only when cover is aggregated per life, compared with declared income and peer policyholders, and checked for the timing of new cover against later claims.

Investigation and response

1. 01Aggregate all cover on the life and request disclosure of policies held with other insurers
2. 02Verify income and insurable interest with documentary evidence before paying a claim or accepting further cover
3. 03Review the intermediary’s other business for similar stacking
4. 04Refer to SIU where non-disclosure or a suspicious death is involved

Related typologies

• Ghost policiesLife or funeral policies written on fictitious people, or on real people who never agreed to cover, to earn commission or claim benefits.
• Early-death clustersDeath claims bunching soon after policy inception, often around one intermediary, area, certifying doctor or funeral home.
• Inflated contents claimsContents claims padded with items never owned, values above what was paid, or receipts that were altered or fabricated.