Fraud is a major problem for the short term insurance industry and it is actually estimated that some fraudulent element is present in up to 40% of short term insurance claims. The rule has therefore been implemented that an insured person needs to present the insurance company with some form of proof of ownership or proof of purchase. This proof must be presented at the time of insuring the item and also when a claim is instituted.

If you insure jewellery you will have a receipt and usually a valuation certificate as proof of ownership. In car insurance ownership is easily proven by checking the registration details of the insured car. The insurance company can do this through the registering authorities so fraud can be more easily detected as far as cars are concerned.

When taking out car insurance one of the underlying principles is that one should have an insurable interest in the item you want to insure – this is proved through ownership. You cannot, for example, insure your neighbour’s car. If that was possible you and your neighbour could both insure his car and claim when the car is stolen. This rule is what differentiates short term insurance from being a form of gambling.