A bill to amend the insurance provisions contained in the 1865 Commercial Code should be enacted in the near future.

This bill will also amend the Criminal Code, as it will establish - for the first time - insurance fraud as a specific crime by adding a new Paragraph 10 to Article 470, which describes several specific types of fraud. This new paragraph details all wilful misconduct related to obtaining insurance coverage fraudulently or the fraudulently collecting insurance indemnities, specifically where an act of malice is involved.

According to legislative reports, the basis for this change is that since insurance fraud has no special classification at present, it is treated as a general type of fraud, which makes it difficult to pursue because it requires the following criminal elements to be present:

  • deceit;
  • financial prejudice to the victim; and
  • a gain for the offender.

If any of these requirements cannot be established, no crime is considered to have been committed. Moreover, since the victim must have been deceived, it is difficult to prove fraud based on the mere fact that an insurer discovered that there was an artifice to collect compensation unduly. Instead, according to the draft bill, a party which maliciously seeks to extract improper payment of insurance compensation will be punished.

The specific wording that the bill intends to introduce reads as follows:

"Article 467(10) sanctions also apply to those who obtained maliciously a complete or partial undue insurance payment for themselves or for a third party, be it by simulating a loss, intentionally causing it, presenting it as occurred for reasons or circumstances others than the true ones, hiding the object of the insurance or fraudulently increasing the actually incurred losses. If, for reasons independent to the beneficiary's will, no undue payment is actually effected, the minimum sanction will be applied. The sanction shall be determined according to the amount improperly claimed."

The rules governing the loss adjustment procedure will not be modified. In practice, if insurance fraud is suspected, it may lead to an investigation by the Prosecutor's Office, which could affect the usual adjustment procedure.

For further information on this topic please contact Emilio J Sahurie at Sahurie & Asociados by telephone (+56 2953 0708) or email ([email protected]).