For some businesses in financial difficulties there can be a great temptation to generate cash from a fraudulent insurance claim. This temptation may lead to the policyholder causing the damage himself. Alternatively it may cause a policyholder to exaggerate the financial consequences of a genuine insured event cashing in on the new for old cover to replace obsolete equipment or stock or simply falsifying support for replacement expenditure not actually incurred.
Insurers can avoid a policy where it can be shown that the claim is in any way fraudulent.
In my experience, it is a question of assessing the risk of fraud, ideally at the underwriting stage, but if not, certainly in the early stages of considering the merits of the claim. The existence of more than one of these features would indicate a higher risk of fraud with the need for consequent scepticism by those reviewing the claim. Where there is scepticism, the use of an experienced fraud investigation team including forensic accountants can be invaluable in unearthing a fraud. They are particularly alert to forgery of documents. Modern scanners and copies have rendered basic forging much easier.